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JBS begins reopening meat plants impacted by weekend cyber attack

Jon Condon, June 3, 2021

AUSTRALIAN beef and lamb processing plants controlled by JBS are likely to resume normal operations either Friday or early next week, Sheep Central understands.

In the United States, the company’s factories are also getting back to work from today, as JBS’s response to the major weekend security breach takes effect.

Some JBS Australia plants did in fact complete a boning shift yesterday, but that was simply to clear carcases held in cold storage from kills performed last Friday, before the cyber-attack occurred.

In the absence of any detail from JBS Australia about likely return to work dates, the Australian Meat Industry Employees Union says its members have been told the following by JBS plant management:

  • Workers at JBS Longford in Tasmania have been told to expect to return to work on Friday.
  • Staff at JBS Dinmore, and JBS Rockhampton in Queensland, have been told by senior management that their first kill is likely to be Monday next week
  • JBS Townsville staff have been told to anticipate a re-start to operations next Tuesday
  • JBS Brooklyn staff in Victoria have also been told work is likely to resume early next week.

Likely start dates could not be obtained for other processing sites including Beef City, Riverina or Scone.

AMIEU acting national secretary Matt Journeaux expressed caution over how reliable these proposed start dates might be, however.

“Fingers crossed, but unfortunately with these types of events, glitches can start showing up when the wheels start turning again – especially in integration of one system with another,” he said.

JBS’s US Beef division, which includes operations in Australia, issued another brief statement overnight. Again, some of the comments appear to be specifically related to North American operations, not necessarily those in Australia:

Today, JBS US and Pilgrim’s announced they are on schedule to resume production at all of their (US) facilities on Thursday. The company’s rapid recovery from the cyberattack continued today, providing further assurance to more than 100,000 JBS USA and Pilgrim’s team members, livestock and poultry producer partners, customers and consumers.

“JBS USA and Pilgrim’s continue to make significant progress in restoring their IT systems and returning to business as usual,” said JBS USA chief executive Andre Nogueira.

“Today, the vast majority of our facilities resumed operations as we forecast yesterday, including all of our pork, poultry and prepared foods facilities around the world and the majority of our beef facilities in the US and Australia.”

“Given the progress our teams have made to address this situation, we anticipate operating at close to full capacity across our global operations tomorrow,” Mr Nogueira said.

Repeating statements made in earlier updates, the company said it was not aware of any evidence at this time that any customers’, suppliers’ or employees’ data has been compromised.

Almost inevitably after the smoke clears after this episode, there will be some redoubled efforts to review cyber-security right across the meat and livestock industry, AMIEU’s Matt Journeaux suggested.

“The shudders from this event have no doubt been felt right across the Australian and global processing industry,” he said.

Somewhere between 7000 and 10,000 JBS staff had been affected by the closure, nationally, he said.

“There are probably 4000 in Queensland alone. JBS, to its credit, has offered permanent staff access to their leave entitlement, but casuals are being seriously affected. We contacted Centrelink and there are some services available to people in real need of money, but if this lasts only another three or four days, it hasn’t slipped too far.”

JBS on Tuesday informed the US government that the ransomware attack against the company on the weekend originated from a criminal organisation likely based in Russia. There has been no word on whether JBS has paid the ransom sought by cyber criminals.

US market impact

Beef Central’s US-based columnist Steve Kay yesterday said USDA’s daily US kill figures for Tuesday showed a national US beef kill of about 94,000 head – down 27,000 head on this time last week, suggesting JBS may have had a ‘minimal’ beef kill, at best, at one or more plants. JBS’s total US beef slaughter capacity (red and unfed) was about 29,000 head, he said.

The company’s five largest US plants in Nebraska, Texas, Utah and Wisconsin which all stopped processing on Tuesday, accounted for about 22,000 head per day on their own, a Bloomberg report said.

The impact from Tuesday’s closures and cyber ransom news alone had been ‘significant,’ and had attracted widespread mainstream media coverage across the US.

Mr Kay said the US boxed beef cutout (wholesale prices, reported daily) went up by US$3/cwt for Choice, and US$5.55c for Select grade on Tuesday compared with Friday (Monday was a Memorial Day holiday).

That was directly attributed to other US packers pushing up their prices, because of the reduced supply in the absence of JBS.

“The key factor now is how quickly JBS can get its operations in North America and Australia up and running  again. If it’s a matter of only two or three days, it will not produce much market impact. But if it drifts into next week, it is going to be more significant,” Mr Kay said.

“The lesson out of this episode for the worldwide meat industry is that they have suddenly realised – if they had not done so before – that they are vulnerable to cyber attack. They are going to have to redouble their efforts and spend a whole lot more to get the best cyber-protection mechanisms money can afford.

“Unfortunately it’s just a part of doing business in today’s world – and for red meat processors, computer systems and connectivity are just absolutely crucial to the day to day running of all parts of their business.”

US plants resume

The latest US Daily Livestock Report issued by Steiner Consulting overnight said production was expected to resume at most JBS US plants today, at least at some level.

“What is unclear at this time is the level at which those plants will be able to operate,” DLR said.

The disruption may impact US spot market pricing on meat for much of the week, it said.

“Buyers for major retailers and foodservice companies will be scrambling to find fill in supply in order to run production. Product for delivery early this week was likely on the road or loaded up so there probably was not a major immediate impact.

“However, even a one or two day disruption will tend to quickly clean-up spot supplies. Those buyers that tend to buy in the spot market may find that what was already a very tight market suddenly became impossible.

Daily Livestock Report said it suspected that as JBS returns to full production, its most immediate concern will be to fill commitments made to major customers.

“This will tend to leave little available for smaller buyers. For those that do not regularly follow this market, the increase in price may appear as a direct result of the cyber attack. But wholesale beef prices have been trending higher for the last two months.

“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 labour situation along the supply chain; and various logistics bottlenecks.”

DLR said retail US meat prices are expected to trend higher through the northern hemisphere summer, but the cyber attack would be only a small part in the big picture.

“The tendency will be to view the attack as the reason why prices are going up and, if consumers panic, that could end up being a self-fulfilling prophecy,” it warned.

“The reality, however, is that prices will be up due to the fact that US processing capacity simply cannot keep up with the level of demand currently in the market. Retail buyers are competing with foodservice buyers and both of them are competing with foreign buyers.

“There is only so much meat that can be processed in a given day regardless of how much livestock and poultry is out there. As much as vegan meals and faux meat may be trending in social media posts, the silent majority is still looking to get a nice pork chop, a juicy burger, and grilled chicken topped with bacon.

A USDA report published yesterday showed forward beef sales for product delivering 22-60 days out were more than double what they were a year ago and 50pc higher than the five year average.

“Prices may be high but so far that has not discouraged buyers from putting in big orders – and this is true for both domestic and export customers,” yesterday’s DLR report said.

“The supply disruption from the hack adds one more complication to a meat supply chain stretched very thin.”

Are IT issues the new normal?

As meat processing plants rely more and more on technology to operate, IT issues aren’t just something that could impact protein processing, but the entire food chain, warned Glynn Tonsor, livestock economist with Kansas State University in an interview with Bloomberg.

However, Dr Tonsor said the advancements and benefits of today’s technology needed to be weighed against the risk of operating without advanced technology.

“What’s an IT risk relative to labour excess risk? he asked. “What’s a modern facility driven by IT risk versus an old facility that might be more manual and maybe has a more fire risk with it, because it’s an older facility? So, there’s a lot of trade-offs in the broader risk.”

Dr Tonsor told Bloomberg that cyber attacks and other IT-related issues could continue to throw curve balls into the food chain, but he was confident the food system will learn how to manage such events, softening the potential impact attacks like the one on JBS will have in the future.

Domestic meat supply remains unaffected

The Australian Meat Industry Council in a statement today said its intelligence suggested no major impacts had been seen on domestic and export beef supply from Australia as a result of the JBS closures.

“The Australian meat industry has a very flexible supply chain, and it is practiced at working together to manage these types of issues,” said AMIC chief executive, Patrick Hutchinson,

“At this stage, interventions in the domestic and export supply chain have been enacted and supply is continuing as normal.”

“The strength and flexibility of the red meat and pork products supply chain has been demonstrated in the past. In areas such as market access issues and COVID-19 impacts. That is why we are world-renowned as the most reliable meat supply chain globally.”

AMIC said it would continue to monitor the situation closely.

 

 

 

 

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