Last week a cyberattack targeting JBS (OTC: JBSAY) , the world's largest meat processor, left the US meatpacking industry reeling. The breach, now linked to the Russian ransomware gang REvil, hit JBS' North American servers and shut down plants in the USA, Canada, and Australia.
As a result, nearly a quarter of U.S. beef production was offline through much of the week, although by Thursday, JBS announced that it had managed to restore operations at all its plants.
Only a single day's production was lost from the attack, "limiting any potential negative impact on producers consumers and the company's workforce," reads a statement from the company.
"The criminals were never able to access our core [computer] systems, which greatly reduced potential impact," said Andre Nogueira, CEO of JBS USA. "Today, we were fortunate that all of our facilities around the globe are operating at normal capacity."
Still, the attack highlighted weaknesses in a meatpacking industry already contending with labor shortages and high feed and transport costs while also further straining already tense U.S.-Russian relations. Last month's breach at Colonial Pipeline also had its origins in Russia, a fact not lost on President Joe Biden, who has vowed to broach the topic of ransomware on his first meeting with Vladimir Putin on June 16.
"We have been in direct communication with Moscow for the imperative for responsible countries to take decisive action against these ransomware attacks," Biden said on Monday, quoted by the New York Times. "We're also going to pursue a measure to disrupt their ability to operate."
While JBS claims to have only lost a singly day's production, even an outage of one day could "significantly impact" wholesale beef prices, according to Monday's Daily Livestock Report.
By Wednesday, the United States Department of Agriculture reported that prices on choice cuts of beef managed to rise by $5.60 per 100 lbs, the sharpest increase in at least a month.
Still, JBS claims that "any lost production" from the breach "will be recovered by the end of next week," which should help mitigate outages' impact on wholesale beef markets. Nevertheless, according to Wednesday's volume of the Daily Livestock Report, the cyberattack only casts a spotlight on much larger problems currently facing the meatpacking industry.
"The most recent attack will only exacerbate what was already a very difficult market, one that reflects the resurgence in demand post-COVID lockdowns; the bullwhip effect from as food service supply chain recovers; the tight labor situation along the supply chain; and various logistics bottlenecks," the report reads.
Before the outage, meat processing plants were already struggling to keep pace with massive orders from buyers within and without. Retail buyers competed with restaurants, which competed with foreign buyers for a limited share of meat processing capacity at plants already overwhelmed with orders ahead of the summer holidays.
In the end, there is only so much meat that can be processed in a given day, regardless of how much livestock and poultry is out there," note the authors of the report. "The supply disruption from the hack adds one more complication to a meat supply chain stretched very thin."