What the JBS cyberattack means for meat supply

Some shoppers may want to brace themselves for yet another possible supply crunch — this time with meat.

Major beef and pork producer JBS USA suffered a cyberattack last weekend, prompting reported shutdowns at company plants in North America and Australia.

The White House has said that the ransomware attack was likely carried out by a Russia-based criminal organization, and that it is dealing with the Russian government on the matter. The Australian government has said that US law enforcement is taking the lead on investigating the attack.

So far, some authorities and trade groups have assured that operations will be back to normal as soon as possible, allaying concerns of major disruption. But experts warn that it will depend on how quickly the issue is taken care of.

Australia hoping to reach ‘full capacity’ soon

David Littleproud, the Australian Minister for Agriculture, Drought and Emergency Management, told CNN Business on Wednesday local time that the country does not believe there will be a red meat shortage, even though JBS accounts for about a quarter of Australia’s red meat processing.

“But we are obviously concerned that there are today limited operations at JBS facilities in New South Wales and Victoria,” he said. “Some work may resume in Queensland tomorrow. We’re hoping that they will get back to full capacity soon, but there is no definitive timeline.”

The Australian Meat Industry Council, a major trade group, said in a statement that “there is no indication whatsoever that this cyberattack will cause a major impact on Australian domestic red meat and pork products supply.”

The United States wants to keep supply moving

In the United States, an official from the United Food and Commercial Workers International Union said Tuesday evening that all US JBS beef plants were shut down.

JBS, meanwhile, has said that “the vast majority” of its food plants will be open Wednesday, adding that “JBS USA and Pilgrim’s were able to ship product from nearly all of its facilities to supply customers. The company’s brands include Pilgrim’s, Great Southern and Aberdeen Black.

The US Department of Agriculture also said it has reached out to meat processors across the country, encouraging them to accommodate additional capacity and help keep the supply chain moving.

The agency said it is talking to food, agriculture and retail organizations to “underscore the importance of maintaining close communication and working together to ensure a stable, plentiful food supply.”

Supply issues could depend on timing

Does fallout from the attack mean a tighter meat supply ahead, and as a result, higher prices? That depends on how quickly the issue is resolved, according to experts.

“Even one day of disruption will significantly impact the beef market and wholesale beef prices,” Steiner Consulting Group, which specializes in commodity prices, wrote in a note Tuesday.

In the United States, at least, that’s partially because of the high demand for burgers and other beef products during Memorial Day Weekend.

“Retailers and beef processors are coming from a long weekend and need to catch up with orders and make sure to fill the meat case. If they suddenly get a call saying that product may not deliver tomorrow or this week, it will create very significant challenges,” Steiner explained.

The attack could also “limit pork supply availability and push up pork prices in the near term,” Steiner said. The group noted that “we think this is a major issue but much will depend on how long the disruption persists.”

Steve Meyer, a consulting economist for the National Pork Producers Council and the National Pork Board, agreed that a one or two day disruption could cause wholesale meat prices to jump. But if the problem is resolved within a few days, he said, restaurants and grocery stores are unlikely to pass those costs onto consumers.

“They would probably absorb those in the short run,” Meyer said. “As long as there was light at the end of the tunnel.”

If it takes longer to return to normal, say a couple of weeks, customers might start to feel the impact.

“Then you’re probably going to have some buyers, whoever depends on JBS for their supplies, that probably could be short product,” he said. In that case, for consumers, it would depend on where their local grocery store sources its meat. “If they buy it from JBS then you might see some shortages. If they don’t buy it from JBS, you might not see anything at all.”

‘We’re very concerned’

One restaurant has already changed its offerings because of the cyberattack. Evans Barbeque Company in Villa Rica, Georgia, said in a Facebook post Tuesday that it will no longer take bulk orders of pork beyond this week because of uncertainty over supply.

“We’re very concerned … because that’s a very big part of our business,” Alicia White, co-owner of the restaurant, told CNN Business.

Before the pandemic, Americans might have been shocked by the idea of a meat shortage. But the last year exposed the limitations of the country’s meat supply chain, which is highly concentrated among a handful of suppliers, including JBS USA. Early in the pandemic, workers got sick at crowded meatpacking facilities, leading plants to temporarily close their doors. The disruption caused prices to soar and led to spot shortages.

Now, the prospect of more shortages could raise alarm bells for consumers, especially as they’ve already been paying more for meat: Beef prices were up 6.1% during the 17 weeks ending May 1 compared with the same stretch the year prior, according to the latest numbers from NielsenIQ, which tracks point of sale data from retailers. Chicken prices were up 4% and pork prices increased 2.6%.

— CNN’s Nathaniel Meyersohn, Alexis Benveniste, Brian Fung, Parija Kavilanz and Jill Disis contributed to this report.