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JBS ransomware attack underscores threat facing meat industry

JBS ransomware attack underscores threat facing meat industry

A ransomware attack that temporarily froze the country’s second biggest producer of beef, pork and poultry upended the national food system this week, highlighting the vulnerabilities in the highly consolidated meat industry.

Hackers believed to have originated in Russia forced JBS SA to shut down its US operations, cutting off the supplier of roughly 25 percent of beef and 20 percent of pork and poultry.

JBS is expected to restart packaging at full capacity by the end of Wednesday, reducing the impact of the shutdown to a small but manageable bump to beef and pork prices that were already trending higher.

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“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,” wrote analysts at Steiner Consulting Group on Tuesday.

“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. The reality is, however, prices will be up due to the fact that processing capacity simply cannot keep up with the level of demand in the market.”

Prices for meat, like many staple commodities, have risen over the past few months as the U.S. economy kicks back into gear. A flood of diners now comfortable with eating in a restaurant and the start of summer cookouts has boosted pressure on meat prices, a curve likely to tick higher thanks to the JBS attack.

While the impact of the JBS shutdown may be brief, the latest high-profile attack on a private company with a major market share in a critical industry has spurred more concern about consolidation within meatpacking and the threats a longer freeze could pose to the U.S.

“It’s alarming to see another cyberattack against a crucial supply chain,” said Sen. Deb FischerDebra (Deb) Strobel FischerLobbying world On The Money: May jobs report to land at pivotal moment in Biden agenda | Biden, top GOP negotiator agree to continue infrastructure talks Friday JBS ransomware attack underscores threat facing meat industry MORE (R-Neb.) in a statement Tuesday.

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“JBS has taken action to resolve this issue. However, the fact that nearly 20% of U.S. meat processing capacity can go offline due [to] a single event could be a hit to Nebraska’s economy, the cattle market as whole, and consumers across America.”

Democrats and Republicans have grown increasingly concerned with the depth of consolidation in the U.S. meat industry and the impact it has had on ranchers and consumers. While Washington was largely sympathetic to JBS in the aftermath of the attack, the company has been at the center of D.C.’s broader scrutiny of the meat industry.

Pilgrim’s Pride, a subsidiary of JBS, was one of several poultry companies charged in a national price-fixing scheme by the Justice Department initiated under the Trump administration. The company agreed to settle for $110 million in October 2020, the same day JBS SA’s parent firm paid $280 million to resolve foreign bribery charges.

Federal prosecutors alleged that JBS SA used U.S. banks, shell companies and an apartment in a bribery scheme that helped finance JBS’s acquisitions of Pilgrim’s Pride and Swift & Co, making it the second biggest U.S. meat producer. The charges helped fuel intense opposition from lawmakers to JBS’s receipt of billions in aid meant to limit the impact of retaliatory tariffs spurred by Trump’s trade battles and calls for a national security investigation into the company.

JBS did not respond to multiple requests for comment.

The FBI on Wednesday attributed the attack to REvil, a Russia-based cybercriminal organization, which is likely to deepen tensions between the U.S. and Moscow. But while much of Washington’s anger may be focused on the Kremlin, the attack is likely to spur calls for closer scrutiny of businesses with outsized presences in crucial industries.

David White, president of cyber risk management firm Axio, said that the high-profile nature of the JBS and Colonial Pipeline disruptions may actually discourage criminal groups from attempting similar attacks, lest they draw more attention from governments.

“It's going to bring enormous diplomatic and political pressure to do something about ransomware that helps hedge the economic benefit of the criminals as a way to calm it down,” White said.

He added, however, that nations opposed to U.S. interests could look for an array of targets that would have a similar impact, knowing they could withstand the potential retribution from Washington.

“Now we've let the entire world know that there are pretty soft targets on the US supply chain underbelly, that would have major economic effects.”