Another cyberattack targeting American infrastructure disrupted the meat processing industry to start the month.
JBS, the largest beef packer and second largest pork packer in the U.S., was forced to suspend operations at some plants as servers supporting the company’s North American and Australian information technology systems were affected by the attack.
Nationwide, slaughter declined an estimated 22% for cattle and 19.5% for swine on Tuesday, according to the CME Group’s Daily Livestock Report.
“It’s apparently getting better,” said Steve Meyer, economist with Partners for Production Agriculture. “They (at JBS) went from slaughtering a few pigs Tuesday to more pigs today (Wednesday) and hopefully more the rest of the week.
“We’re hoping they’ll be back to normal by the first of the week,” he noted. “For perspective, the Colonial Pipeline (cyberattack) was about a week before service was restored after they got hacked. I hope this isn’t a harbinger of things to come for us. It’s certainly been a disruption.”
The situation could cause some temporary shortages of pork products in some retail markets, which could drive cutout values higher. It could also back some hogs up on farms, which could temporarily weigh on prices at the farm level, Meyer noted.
“It doesn’t look like there’ll be a long tail,” he said. “I don’t see a big price impact.”
Live hog prices remained on the defensive as of Wednesday.
JBS accounts for about 23% of total cattle capacity in the U.S. After an initial downturn, live cattle prices recovered by about $3.50 Wednesday back to around $117 per hundredweight.
“We don’t need cattle backed up anymore than what we are,” Toni Dunker, market analyst with Advance Trading in Quincy, told the RFD Radio Network. “The longer it takes to unfold (the processing issue), the worse it makes cattle market conditions.”
Reaction to the JBS cyberattack might have been a lot more dramatic if not for the experience last spring when the processing industry experienced severe slowdowns due to the coronavirus.
“We’d all have our hair on fire had it not been what we went through last year,” Meyer said. “This (JBS issue) doesn’t have the prospects of being anywhere near what happened last year. At present time, it affects about 18% of (hog) slaughter capacity.”
The situation does not appear to be impacting demand, so far.
“I still think we’re enjoying unprecedented levels of demand,” Meyer said. “Pork demand is up 5% this year and exports are better than we thought (and set a record in March).”
The next issue affecting meat processing is a court ruling that struck down a regulatory provision allowing facilities to operate at faster speeds. USDA’s Food Safety Inspection Service currently intends to require processing facilities operating under the New Swine Inspection System to reduce speeds in accordance with the ruling.
“The line speed issue won’t have a big hit come July 1, when six plants have to slow down. It will be a big deal for the plants (with capacity reduced as much as 25%), but for the industry, it’s about 2.7% of total capacity,” Meyer said.
However, if the processing slowdown occurs, it could push pork capacity to the max for at least seven to eight weeks in the fall.
“If USDA doesn’t appeal this in August and have some type of positive result by fall, that’s where we’ll feel the line speed situation,” Meyer added.