Your conclusion is correct. The “Old Price” your ancestor wrote about very definitely was Confederate General Sterling Price, who launched an invasion of Missouri in September 1864. The initial objective of the invasion was to hopefully capture St. Louis, and secondarily to recruit new Rebel troops from among the population of Missouri.
The 27th Iowa Infantry was assigned to the 3rd Division of the 16th Corps, and the 16th Corps was part of the army commanded by Union General William Tecumseh Sherman, who in the spring of 1864 intended to drive south from Chattanooga toward Atlanta. The 27th Iowa Infantry was expected to be one of the regiments that accompanied Sherman on that campaign.
However, in March 1864 Sherman loaned a portion of the 16th Corps, specifically its 3rd Division (including the 27th Iowa), to Union General Nathaniel Banks for the Red River Campaign, the purpose of which was to capture Shreveport, Louisiana. Sherman wasn’t planning to commence his campaign for more than another month, and General Banks assured him that the Red River Campaign would end before that. Sherman’s loan, therefore, was based on his understanding that the 3rd Division would be returned to him before he left for Atlanta. It didn’t work out that way.
Banks proved to be a less-than-impressive field commander. He failed to capture Shreveport and his campaign did not conclude until late May, far too late for the 3rd Division to accompany Sherman. In fact, Banks was lucky not to be trapped in western Louisiana until summer. Were it not for some crafty water engineering by one of his junior officers in Alexandria, Louisiana, the transport ships upon which Banks’ soldiers traveled up the Red River, and which they intended to use to travel back down, would have become hopelessly trapped by the river’s rapidly dropping water levels.
The Red River Campaign was a difficult one for Union troops. The relatively few victories they enjoyed were minor affairs, and they were cut up badly in the only two significant battles they fought. The Union column was soundly defeated at Mansfield on April 8 and it fought to a draw at Pleasant Hill the following day. The 27th Iowa was not present at Mansfield, but it was one of four regiments in the most forward-deployed Union brigade at the Battle of Pleasant Hill. It came under an especially ferocious attack in that battle and, having sustained a large number of casualties, was forced to retreat when the brigade nearly became encircled.
After the Red River Campaign concluded, the 3rd Division could have re-joined Sherman in the field, catching up with him at some point during his advance toward Atlanta. But Sherman decided it was just as well to have the Division remain in western Tennessee, as it would be useful in protecting Tennessee from the Confederate cavalry of Nathan Bedford Forrest, who was active in Mississippi and potentially might threaten Sherman’s rear. Accordingly, the 27th Iowa spent the summer based in Memphis, from where it and the remainder of the 3rd Division conducted two campaigns against Forrest … the Tupelo Campaign in July and the Oxford Campaign in August. Only one significant battle developed during these campaigns, however, that being the Battle of Tupelo (also known as the Battle of Harrisburg) on July 14 and 15. The 27th Iowa participated in that battle but did not sustain many casualties.
In September the 3rd Division was ordered to re-join Sherman in Atlanta, via Nashville, and it had already commenced its trip when Price launched his invasion of Missouri. In response to that invasion, the 3rd Division was diverted back to St. Louis. Four companies of the 27th Iowa were sent to Pilot Knob, Missouri to help defend the Union fort there, while the remaining companies were assigned to the defenses of St. Louis. Fortunately for the Union, Price did not have sufficient strength to capture St. Louis once the 16th Corps soldiers arrived, and he abandoned that objective. Instead, he veered to the west, focusing instead upon the Missouri capital, Jefferson City.
As Price advanced westward, the 16th Corps gave pursuit. Your ancestor was obviously one of the 27th Iowa soldiers participating in that pursuit. In his letter he indicates that a fight with Price was expected shortly, but that fight never materialized. The 16th Corps regiments never caught up to Price, who after discovering that Jefferson City was also too well defended, headed toward Kansas City and was defeated by other Union troops near there (at Westport, then a suburb of Kansas City but today part of the city, I believe). Price turned southward after his defeat and retreated back to Arkansas.
As for the precise route taken by your ancestor’s regiment, I’m not sure. One can probably pinpoint it reasonably close by examining the camp locations from which 16th Corps commanders, particularly the Division commander General A. J. Smith, wrote their dispatches. These can be found in the Official Records of the War of the Rebellion, a 128-volume post-war publication of the US War Department. Most major university libraries have a hardbound set of these books, and smaller colleges may have a set, as well, or at least a searchable computer disc of the modern digitized transcription.
As for the creek bottom location from which your ancestor wrote on October 9, my guess is that he was somewhere around either St. Clair or Union, a couple small towns on the road from St. Louis to Jefferson City. Each of these towns was visited by at least some elements of Price’s army as it advanced toward Jefferson City, and my off-hand guess, without doing a lot of research, is that the 16th Corps would have tried to stay pretty directly on Price’s heels.
I suspect St. Clair or Union was the likely stopping point for the 27th Iowa on October 9 because, according to an 1864 map of southern Missouri found on plate 47 in the Official Military Atlas of the Civil War (Davis, Kirkley, Perry), these towns lie roughly 60 miles east of Jefferson City and about 40 or 45 miles west of St. Louis. The bulk of the 16th Corps left St. Louis around October 6, and 40-50 miles would be about right for three days’ marching. Also, the town of Union sat along a creek or small river which, unfortunately, isn’t identified by name on the map. I suspect the first place name your ancestor mentions in his letter, the one that begins with an S and is illegible thereafter, is probably St. Louis or perhaps some abbreviation thereof (e.g., StL, SL, StLo, etc.).
Finally, as for the March to the Sea, Sherman had not yet decided on a course of action when Price invaded Missouri. He had several options and was still mulling them over, so the 27th Iowa wasn’t ever assigned to the March or given any orders related to it. Had the regiment caught up to Sherman it most likely would have accompanied him to the sea, but it didn't catch up and it didn't go on the March.
After Price was defeated and Sherman started off for Savannah (the place where he met the sea), Confederate General John Bell Hood detached from Sherman and launched an invasion of middle Tennessee, threatening Nashville. An emergency call went out to the 3rd Division of the 16th Corps, still back in Missouri, asking that it rush to Nashville to reinforce that city’s meager defenses. It did so, arriving by river steamers on December 1 and subsequently participating in the Battle of Nashville on December 15 and 16.