IBP Inc said it is committed to becoming more directly involved in hog production to supplement its primary supplies from independent producers.
IBP is also working to develop more long-term supply agreements with independent pork producers to ensure reliable future supplies of high quality hogs. While most of the hogs it currently buys are purchased on a daily cash market basis, IBP said it has increased procurement of hogs through marketing arrangements in recent years.
"We believe we must align ourselves closer to pork production," Robert Peterson, IBP Chairman, said in a statement. "This will give us better access to hog supplies. It will also help us better assure the quality of the hogs, a factor which has become increasingly important in today's competitive marketplace."
IBP reported second-quarter earnings of $0.36 a share, below the consensus of $0.53 and down from last year's earnings of $0.90 a year ago.
Its beef plants improved capacity and profitability in the second quarter compared to the first quarter, IBP said.
However, their peformance was down from last year when the export market was stronger and livestock supplies were better. IBP said live cattle prices were 11 percent higher in the 1997 second quarter than a year ago.
Customers also reduced their inventories during the second quarter because of softer demand, it added.
Export sales for the second quarter were down 10 percent form last year's record high, but were up nine percent from the first quarter. IBP said business in the Far East continues to improve slowly from last year's food safety scares.
Even though there have been cutbacks in industry pork production, tight hog supplies and excess pork processing capacity continued to hurt IBP's fresh meats results.
Live hog prices during the second quarter were at or near their highest levels in recent years, IBP said. However, it said these conditions are expected to ease as hog supplies begin to increase later this year and in early 1998.
Second quarter earnings also reflect the continued expense of recent plant openings. The company said it is still in the start-up phase at its Logansport, Ind., pork plant; Alberta, Canada, expanded beef processing operations; and Columbia, S.C., cooked meats plant.
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