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All of JBS’s US Beef Plants Were Forced Shut By Cyberattack

A cyberattack on JBS SA, the largest meat producer globally, forced the shutdown of all its U.S. beef plants, wiping out output from facilities that supply almost a quarter of American supplies. All of JBS’s US Beef Plants Were Forced Shut by Cyberattack

All of the company’s fed-beef and regional beef plants were forced to shutter, and all other JBS meatpacking facilities in the country experienced some level of disruption to operations, according to an official with the United Food and Commercial Workers International Union.

JBS didn’t immediately respond to a request for comment. The union represents workers at the company’s plants in the U.S.

Slaughter operations across Australia were also down, according to a trade group, and one of Canada’s largest beef plants was idled. That comes after a weekend attack on the Brazilian company’s computer networks, according to JBS posts on Facebook, labor unions and employees.

It’s unclear exactly how many plants globally have been affected by the ransomware attack as Sao Paulo-based JBS has yet to release those details. The prospect of more extensive shutdowns worldwide is already upending agricultural markets and raising concerns about food security as hackers increasingly target critical infrastructure. Livestock futures slumped, while pork prices rose.

Hackers now have the commodities industry in their crosshairs with the JBS attack coming just three weeks after Colonial Pipeline Co., operator of the biggest U.S. gasoline pipeline, was targeted in a ransomware attack. It also happened as the global meat industry battles lingering Covid-19 absenteeism after recovering from outbreaks last year that saw plants shut and supplies disrupted.

The White House offered assistance to JBS after the company notified the Biden administration on Sunday of a cyberattack from a criminal organization likely based in Russia, White House Deputy Press Secretary Karine Jean-Pierre told reporters Tuesday.

There have been more than 40 publicly reported ransomware attacks against food companies since May 2020, said Allan Liska, senior security architect at cybersecurity analytics firm Recorded Future.

JBS suspended its North American and Australian computer systems on Sunday after an organized assault on some of its servers, the company said in a Monday statement. Without commenting on plant operations, JBS said the incident may delay certain transactions with customers and suppliers.

“Retailers and beef processors are coming from a long weekend and need to catch up with orders,” Steiner Consulting Group said in its Daily Livestock Report. “If they suddenly get a call saying that product may not deliver tomorrow or this week, it will create very significant challenges in keeping plants in operation and the retail case stocked up.”

Grocery Stores

The impact on meat prices at the grocery store may not be immediately apparent. Retailers don’t always like hiking prices on consumers and may try to resist, according to Michael Nepveux, an economist with the American Farm Bureau Federation.

“How long it goes on will impact to what level consumers start to see something at the grocery stores,” he said in a phone interview.

President Joe Biden directed his administration to do whatever it can to mitigate the impact on the meat supply.

“Attacks like this one highlight the vulnerabilities in our nation’s food supply chain security, and they underscore the importance of diversifying the nation’s meat processing capacity,” said U.S. Senator John Thune of South Dakota, the Senate’s No. 2 ranking Republican leader.

Any substantial disruption in meat processing would further stoke mounting political concerns about the concentration of the meat industry and complaints of the four giant companies that control more than 80% of U.S. beef processing unfairly leverage their power over farmers and consumers.

JBS is the No. 1 beef producer in the U.S., accounting for 23% of the nation’s maximum capacity compared to rival Tyson Foods Inc.’s 22% share, according to an investor report by Tyson. JBS accounts for roughly a fifth of pork capacity.

JBS closed beef processing facilities in Utah, Texas, Wisconsin and Nebraska and canceled shifts at plants in Iowa and Colorado on Tuesday, according to union officials and employees. In Canada, an Alberta processing plant was expected to resume operations this afternoon after being idled since Monday, a union spokesman said.

Pork and chicken facilities including one in Minnesota were also closed by the owner of Pilgrim’s Pride Corp., the second-biggest U.S. chicken producer, said union officials and employees. At least five of the six U.S. pork facilities were cutting back operations Tuesday, according to Facebook posts from those plants.

William Callicott, president of the Mid-Atlantic Council of Food Inspection Locals, AFGE, said at least two Pilgrim’s Pride poultry plants in Chattanooga, Tennessee, were closed due to the cyberattack.

Meat Markets Go Without Key U.S. Prices After Cyberattack on JBS

“There are at least 10 plants I have knowledge of that have had operations suspended because of the cyberattack,” said Paula Schelling-Soldner, acting chairperson for the national council of locals representing food inspectors for the American Federation of Government Employees. She declined to identify the locations.

UFCW Internatioanl President Marc Perrone, whose union represents more than 25,000 JBS meatpacking employees, called on the company to “to ensure that all of its meatpacking workers receive their contractually guaranteed pay as these plant shutdowns continue.”

There were some initial signs of restarts. The JBS beef-processing facility in Brooks, Alberta, was resuming operations on Tuesday afternoon, according to Scott Payne, spokesman for United Food and Commercial Workers Canada Union Local 401.

Chicago cattle futures slumped as much as 3.4% Tuesday, before trimming losses. Slaughterhouse closures exacerbated an existing supply glut of animals. The U.S. Department of Agriculture’s midday reports for beef and pork didn’t disclose prices due to “packer submission issues.” However, the CME Group’s pork futures contract jumped by more than 3.5%.

The number of cattle slaughtered in the U.S. fell 22% from a week ago, while hogs were down 20%, according to USDA estimates.

JBS owns facilities in 20 countries. The U.S. accounts for half of the company’s revenue, while Australia and New Zealand represent 4% and Canada accounts for 3%, according to corporate fillings. Brazilian plants are operating normally, a JBS spokesperson said Tuesday by phone.

Backup Servers Fine

Backup servers were not affected, and the company is working to restore systems as soon as possible, according to a Monday statement from JBS USA. JBS’s shares rose 2.3% Tuesday in Sao Paulo, outpacing the 1.6% gain for Brazil’s Ibovespa benchmark index.

JBS is the largest Australian meat and food processor with a portfolio of beef, lamb, pork, and value-added branded products, according to its website. It exports to more than 50 countries and its Dinmore facility is the biggest beef plant in the southern hemisphere.

Still, the shutdown is a big concern for exports if it drags on, said Matt Dalgleish, manager of commodity markets insights at Thomas Elder Markets, noting Australia ships overseas about 70% to 75% of red meat products from sheep and cattle.

“Given the size of JBS globally, if they were offline for any more than a week, then we’re going to see disruption to supply chains for sure,” he said.

Updated: 6-3-2021

Why One Hack On One Firm Can Shake Global Meat Supply

In the last three years, a fire, a pandemic and now a cyberattack have disrupted the U.S. meat industry. The common thread between these very different incidents is that they show a highly concentrated market with little margin for error. A ransomware attack on JBS SA, the largest meat producer globally, at the end of May shut nearly a fifth of America’s meat production and idled JBS plants as far afield as Australia and Canada.

The disruption raised anew questions of whether the dominance of a few giant companies has undermined resilience in the sector, and comes at a time when market concentration is being scrutinized in a wide range of fields.

1. How Concentrated Is The Meat Market?

In the U.S. beef industry, about 80% of cattle-slaughtering is done by four companies; in the U.S. hog market, the same number of firms account for more than 70% of capacity. Globally, red meat and poultry production has remained fragmented but the world’s biggest protein companies, including JBS and Tyson Foods Inc., have been expanding into Europe and Asia to meet surging demand. Meanwhile, Smithfield Foods Inc., the world’s largest pork producer, is owned by Hong Kong-listed WH Group.

2. How Did That Happen?

Consolidation has grown significantly over the last decade, as the biggest companies seek to use their size to offset the boom-and-bust cycles of livestock and grains markets. Drought nearly 10 years ago sent animal-feed prices to record highs and crushed cattle profits, prompting some companies to exit the business. Economies of scale have also proved important during a time of global growth in meat demand.

The bigger firms are better able to take on the risks and long timeline involved in opening new plants, including finding a location where a community welcomes a large and perhaps smelly facility. Finding enough workers and also animals to slaughter is another challenge. Some existing meat companies have even complained recently about the skyrocketing cost of building materials.

3. How Has That Worked Out?

Up until recently, it’s worked out fairly well for them. Prior to the pandemic, U.S. production of pork and beef had grown every year, respectively, since 2014 and 2015 to satisfy a rising global taste for meat. But in August 2019, a fire at a cattle-slaughtering plant in Holcomb, Kansas, shocked the market: cattle prices plummeted while beef prices soared. That dynamic was even more pronounced in 2020 when lockdowns forced by the Covid-19 outbreaks prompted limited meat shortages — such as a lack of burgers at Wendy’s.

With thousands of plant workers sickened, food supplies slowed into the restaurant and retail channels and the meat giants faced criticism for not protecting workers. With prices rising, the farmers who raise cattle, hogs and chickens have complained about rising inequities in the market — that while consumers are paying more for meat, the farmers are not sharing the profits.

4. What Does That Mean For Farmers And Consumers?

Six farm and cattle trade groups united in May behind demands for meatpackers to disclose more information on cattle purchases, and for the Justice Department to publicly report on an antitrust investigation it launched a year earlier into the four major beef processors. Sixteen members of Congress wrote the DOJ the same day pressing for a progress report on the probe.

Two bills have been introduced in Congress to require more transparency in pricing through negotiated markets instead of private contracts, in the hopes that it will give producers more leverage in transactions.

The Agriculture Department also is planning to use some funds from the Biden administration’s $1.9 trillion rescue plan to help small- and medium-sized meat processors expand operations, possibly using loan guarantees or grants, with goals to make the industry more resilient to disruptions.

5. How Are The Meat Producers Doing?

Packers are prospering. Tyson Foods Inc., the largest U.S. meat company, in May reported record margins of 11% for beef in its second quarter. The company’s stock is up 24% so far this year, double that of the benchmark S&P 500 index. JBS SA’s shares are up more than 30% in 2021.

Meat Supplies Tighten As Cyberattack On JBS Snarls Food Chain

Slaughterhouse outages are latest blow to industry facing higher costs, labor shortages.

A ransomware attack against JBS SA sent shock waves throughout the U.S. food industry and exacerbated tension between Washington and Moscow, even as the meatpacker restarted plant operations.

JBS said most of its plants resumed operations Wednesday, though some shifts and processing operations remained suspended, according to individual plants’ social-media posts.

“We anticipate operating at close to full capacity across our global operations tomorrow,” said Andre Nogueira, chief executive of JBS’s U.S. operations.

The White House, which said that JBS reported that the attack originated from a criminal group likely based in Russia, said President Biden plans to bring up the problem of ransomware during a summit with Russian President Vladimir Putin in Geneva on June 16.

Asked at the White House on Wednesday whether he would retaliate against Russia over the cyberattack, Mr. Biden said: “We’re looking closely at that issue.” Russian officials didn’t immediately respond to a request for comment.

The attack on JBS this week knocked out production at plants that process nearly a quarter of the beef and a fifth of the pork produced in the U.S., pushing up wholesale meat prices while complicating livestock deliveries from farms.

Chicken plants operated by Pilgrim’s Pride Corp. , a subsidiary of Brazil-based JBS, the world’s biggest meat company by sales, were also affected. Florida-based grocery chain Publix Super Markets Inc. said the plant closures could lead to intermittent shortages of chicken over the next few days.

The outages are the latest blow to a meatpacking industry that is also contending with labor shortages and high costs for transport and animal feed.

Wholesale prices for beef and pork rose following the attack, and meat buyers said price increases for consumers would likely follow if problems persisted. Prices for choice cuts of beef sold in boxes rose by $5.60 to $340.16 per hundred pounds on Wednesday, marking the biggest increase in at least a month, according to U.S. Department of Agriculture data.

‘We’re grabbing product from every other source.’
— Jagtar Nijjar, executive at distributor Gordon Food Service

John Stevens, director of purchasing for G&C Foods, a supplier to restaurant distributors, said he expected prices to climb further if plant outages continue. “The longer it goes the more we’ll see,” he said.

Mr. Stevens said he spent Tuesday fielding calls from restaurant distributors racing to find alternative supplies of the beef, pork and chicken they typically order from JBS and Pilgrim’s. G&C, which purchases millions of pounds of meat and poultry from the companies each year, bought meat from other meatpackers, and might ration deliveries to customers if supplies tighten in coming days, he said.

“There’s only so much volume to go around,” Mr. Stevens said. He said JBS told him that orders for meat already on the road would be delivered, but that it was unclear if or when other orders in the pipeline would arrive. JBS said that nearly all of its U.S. plants delivered products on Tuesday.

The USDA said it had contacted several major meat processors to encourage them to add capacity where possible. The agency said it would continue to encourage U.S. food and agriculture companies to take steps to protect their information technology and supply chain infrastructure.

Meat supplies were already tight before the cyberattack. Surging demand from reopening restaurants, along with production problems at meat plants, are driving up costs of bacon, chicken wings and other products as people continue to make big grocery purchases. Some restaurants and supermarkets have raised prices for consumers as a result.

Distributor Gordon Food Service Inc. bought meat from other suppliers Tuesday while JBS plants were offline, said Jagtar Nijjar, Gordon’s director of imports and commodities. Mr. Nijjar said he expected it to take four business days for its normal order flow from JBS to resume. Normally, he said, Gordon gets more than half of its pork from JBS, at least half a million pounds every week.

“We’re grabbing product from every other source,” Mr. Nijjar said.

U.S. cattle producers, meanwhile, said they were waiting to learn whether they would be able to deliver animals to JBS plants on schedule this week. U.S. meat companies slaughtered 105,000 cattle and 439,000 hogs on Wednesday, down 13% and 9%, respectively, from a week prior, according to USDA data.

Dave Stevenson, general manager of Red Rock Feeding Co. in Red Rock, Ariz., said he was unsure whether he would be able to deliver more than 70 cattle to a JBS plant near Phoenix as planned on Friday. Animals he had shipped to a JBS plant in Utah on Monday were still waiting to be slaughtered on Tuesday, he said.

The United Food and Commercial Workers International Union, which represents over 25,000 JBS meatpacking workers, called on the company to ensure all its workers would continue to receive pay as plant shutdowns continue. A JBS spokesman said workers will be paid according to the terms of the company’s contract.

The cyberattack hit JBS operations outside the U.S. as well. The company’s Canadian beef operations on Wednesday were set to resume normal slaughtering and processing operations, the company told workers in a notice posted on Facebook.

In Australia, several thousand meat workers temporarily stood down on Wednesday while JBS worked to bring operations in the country back to full capacity, said Matt Journeaux, an official at the Australasian Meat Industry Employees’ Union.

“They have no idea when this is going to be rectified or if there is any end in sight,” he said.

The Australian arm of JBS uses the same computer system as the company in the U.S., which is why operations in both countries were affected, said David Littleproud, the country’s agriculture minister.

Mr. Littleproud said processing of beef, lamb and pork was disrupted by the attack, the latest blow to Australia’s meat industry after a prolonged drought reduced livestock numbers. JBS accounts for roughly a quarter of Australia’s red-meat processing.

“It’s also important to understand it’s not just JBS that’s impacted by this, it goes right back to the farm gate and obviously they’re working as hard as they can to make sure that there’s continuity in that supply chain,” Mr. Littleproud said.

Australian authorities are meeting with U.S. law-enforcement agencies to pinpoint the source of the attack, Mr. Littleproud said.

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