Categories: Tech

The nation’s largest meat processor has been hit with a cyberattack. What does that mean for the food supply chain?

JBS cancelled shifts at multiple processing plants today. An extended disruption could cause backlogs on feedlots and high prices for grocery shoppers.

JBS USA, a subsidiary of JBS, the largest meat supplier in the world, announced on Monday that it had been hit by an “organized cybersecurity attack” over the holiday weekend. The attack affected servers in North America and Australia, and the company canceled Tuesday shifts at several plants across the country. The attack also halted slaughter operations in Australia.

It’s not yet clear how the JBS shutdowns and shift cancellations—which have impacted some of the largest pork- and beef-processing plants in the nation—may affect the U.S. meat market. The company controls about 20 percent of the beef sold nationwide. 

Because the company’s operations are so expansive, any disruptions in JBS processing capacity could ripple across the supply chain. On Tuesday, the Department of Agriculture delayed the issuance of its daily beef sales report, citing “packer submission issues.” It was unclear whether the delay had anything to do with JBS. A CNN White House correspondent reported on Tuesday afternoon that JBS told the Biden administration it had received a ransom request from a criminal organization “likely based in Russia.” The White House offered the company “assistance,” and the Federal Bureau of Investigation said that it was investigating the attack.

The attack comes just weeks after hackers targeted Colonial Pipeline, fueling concerns about gasoline shortages up and down the East Coast. The company halted operations for days, only resuming them after paying a $4.4 million ransom

Almost every aspect of the company’s operations rely on its computer systems to some extent, including the ability of workers to clock into their shifts.

According to company announcements on Facebook, JBS closed plants throughout the country, including Worthington, Minnesota, Ottumwa, Iowa, and Cactus, Texas, though the company did not issue an exact count of closures. It also closed processing plants in Grand Island, Nebraska, and Omaha, Nebraska, said Eric Reeder, president of United Food and Commercial Workers Local 293 in Nebraska. A Facebook post confirmed that the Grand Island plant was closed with the exception of the maintenance and shipping departments. Reeder said that almost every aspect of the company’s operations rely on its computer systems to some extent, including the ability of workers to clock into their shifts.

“Some of their knife sharpening machines are computerized,” Reeder said. “Some of the lines are timed by computers, all of that stuff is crucial … Basically, they’re down until further notice.”

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Feedlot operators are expecting the cyberattack to cause backlogs on farms, as well. 

Dean Weborg, owner of Weborg Feedlot in Bridgeport, Nebraska, said that he’s currently scheduled to deliver 500 head of cattle to JBS on Wednesday, but he’s “doubtful” that will go through. If that’s the case, the feedlot will have to continue raising the animals, until another facility can absorb the glut caused by JBS’s shutdowns—if that’s even possible.

“There are no other processing plants that can pick up the lost capacity from JBS.”

“We have to continue to feed the cattle, it raises our costs, and it breaks the supply chain going to consumers,” Weborg said. “There are no other processing plants that can pick up the lost capacity from JBS.”

The longer JBS plants are closed, the greater the impact on the cattle market, said Lee Reichmuth, cattle producer and board member for the U.S. Cattlemen’s Association. Worse, as has happened in recent years with Covid-19-related shutdowns and a fire at a Tyson meatpacking plant in Holcomb, Kansas, disruptions in slaughter operations can lead to a glut of ready-for-market livestock. As more and more cattle flood the market, the balance between supply and demand shifts in favor of meatpackers like JBS, which can then pay less for live animals once they reopen. 

Meanwhile, prices at the grocery store remain as high—or higher—than ever. “This is just another black swan event, so to speak, that the producers and consumers both suffer from,” Reichmuth said, adding that prices for beef producers are already at 10- and 11-year lows. A one-day disruption might be “minute” in the grand scheme of things, Reichmuth said, but closures lasting beyond five days or so “could affect things in a tremendous way” for producers.

In a news release on Monday, JBS said it was “not aware of any evidence that any customer, supplier, or employee data has been compromised or misused as a result of the situation. Resolution of the incident will take time, which may delay certain transactions with customers and suppliers.” 

This is a developing story and we’ll be updating it as the situation unfolds.

H. Claire Brown and Jessica Fu
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H. Claire Brown and Jessica Fu

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