Some buyers may want to prepare for another potential supply crisis, this time with meat.
Beef and pork producing giant JBS USA suffered a cyberattack last weekend, leading to reported shutdowns at the company’s plants in North America and Australia.
The White House has said the ransomware attack was likely carried out by a Russian-based criminal organization and that it is dealing with the Russian government about it. The Australian government has said U.S. law enforcement is taking the lead in investigating the attack.
So far, some authorities and trade groups have assured that operations will return to normal as soon as possible, allaying concerns of a major disruption. But experts caution that it will depend on how quickly the problem is resolved.
Australia expects to reach ‘full capacity’ soon
David Littleproud, Australia’s Minister for Agriculture, Drought and Emergency Management, said the country does not believe there is a shortage of red meat, even though JBS accounts for about a quarter of Australia’s red meat processing.
“But obviously we are concerned that there are limited operations at JBS facilities in New South Wales and Victoria today,” he said. “It’s possible that some work may resume tomorrow in Queensland. We expect them to be back to full capacity soon, but there is no definitive timetable.”
The Australian Meat Industry Council, a major trade group, said in a statement that “there is no indication that this cyber-attack will cause a major impact on Australia’s domestic supply of red meat and pork products.”
U.S. wants to keep supply on the move
In the United States, an official of the United Food and Commercial Workers International Union said Tuesday night that all U.S. JBS beef plants were shut down.
JBS, meanwhile, has said that “the vast majority” of its feed plants will be open Wednesday, adding that “JBS USA and Pilgrim’s were able to ship product from nearly all of their facilities to supply customers.” The company’s brands include Pilgrim’s, Great Southern and Aberdeen Black.
The U.S. 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 with retail, food and agriculture organizations to “stress the importance of maintaining close communication and working together to ensure a stable and abundant food supply.”
Supply problems could depend on timing
Will the consequences of the attack mean tighter meat supplies ahead and, as a result, higher prices? That depends on how quickly the problem is resolved, experts say.
“Even one day of disruption will significantly affect the beef market and wholesale beef prices,” Steiner Consulting Group, which specializes in commodity prices, wrote in a note Tuesday.
In the U.S., at least, that’s due in part to strong demand for hamburgers and other meat products over Memorial Day weekend.
“Retailers and meat processors are coming off a long weekend and need to catch up on orders and make sure they fill the meat case. If they suddenly get a call saying product won’t be delivered tomorrow or this week, it will create very significant challenges,” Steiner explained.
The attack could also “limit the availability of pork supply and drive up pork prices in the short term,” Steiner said. The group noted that “we believe this is a significant problem, but much will depend on how long the disruption persists.”
Steve Meyer, an economist with commodities firm Kerns and Associates, agreed that a one- or two-day disruption could send wholesale meat prices soaring. But if the problem is resolved in a few days, he said, restaurants and grocery stores are unlikely to pass those costs on to consumers.
“They would probably absorb those in the short term,” Meyer said. “Provided there’s light at the end of the tunnel.”
If it takes longer to get back to normal, say a couple of weeks, customers may start to feel the impact.
“Then there will probably be some buyers, whoever relies on JBS for their supplies, who will probably face product shortages,” he said. In that case, for consumers, it would depend on where their local store gets their meat. “If they buy it from JBS, you may see some shortages. If they don’t buy it from JBS, you may not see anything at all.”
‘We are very concerned’
One restaurant has already changed its offerings due to the cyberattack. Evans Barbeque Company in Villa Rica, Georgia, said in a Facebook post Tuesday that it will no longer accept bulk orders for pork beyond this week due to uncertainty over supply.
Before the pandemic, Americans may have been surprised at the idea of a meat shortage. But the past 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 fell ill at crowded meatpacking facilities, causing plants to temporarily close their doors. The disruption sent prices soaring and led to shortages.
Now, the prospect of more shortages could set off alarm bells for consumers, especially since they have already been paying more for meat: meat prices rose 6.1% during the 17 weeks ended May 1 compared with the same period a year earlier, according to the latest figures from NielsenIQ, which tracks retailers’ point-of-sale data. Chicken prices were up 4% and pork prices were up 2.6%.