JBS Plants Reopening After Cyberattack

Packer Deals With Cyberattack as Cattle Industry Asks Federal Lawmakers for Market Reforms in Face of High Feed Costs

Todd Neeley
By  Todd Neeley , DTN Staff Reporter
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JBS USA said it expects most of its meatpacking plants will come back online following a cyberattack. (Photo by Mandi Cottrell)

LINCOLN, Neb. (DTN) -- The vast majority of JBS USA Holdings Inc.'s meatpacking plants are expected to return to production Wednesday following a cyberattack on the company that led to the temporary closure of the company's largest plants, the firm announced in a news release Tuesday night.

The temporary closure led to concerns Tuesday that not having the world's largest meatpacker reporting prices to USDA would inject more uncertainty in the cattle markets.

"JBS USA and Pilgrim's are a critical part of the food-supply chain and we recognize our responsibility to our team members, producers and consumers to resume operations as soon as possible," JBS USA Chief Executive Officer Andre Nogueira, said in a statement.

"Our systems are coming back online and we are not sparing any resources to fight this threat. We have cybersecurity plans in place to address these types of issues and we are successfully executing those plans. Given the progress our IT professionals and plant teams have made in the last 24 hours, the vast majority of our beef, pork, poultry and prepared foods plants will be operational tomorrow [Wednesday]."

The company said it was able to ship product from nearly all of its facilities to supply customers. "The company also continues to make progress in resuming plant operations in the U.S. and Australia," JBS said in the news release. "Several of the company's pork, poultry and prepared foods plants were operational today [Tuesday] and its Canada beef facility resumed production."

JBS USA reported Sunday it was the target of an "organized cybersecurity attack, affecting some of the servers supporting its North American and Australian IT systems." While JBS said there was no evidence customer, supplier or employee data was compromised, "resolution of the incident will take time, which may delay certain transactions with customers and suppliers."

A number of JBS meatpacking plants across the United States canceled shifts Tuesday, while the company continued to rectify the situation.

Dow Jones reported Tuesday the Federal Bureau of Investigation is looking into what was a ransomware attack on JBS. DJ reported JBS told the White House a ransom demand came from a criminal organization "likely based in Russia."

CATTLE INDUSTRY CONCERNS

Leadership in the House and Senate agriculture committees received a cattle-market wish list from a number of cattle groups on Tuesday, as federal lawmakers are increasingly pressured to help address market issues.

In a letter to Reps. David Scott, D-Ga., and Glenn Thompson, R-Pa., and Sens. Debbie Stabenhow, D-Mich., and John Boozman, R-Ark., the chairmen and ranking members on the House and Senate agriculture committees, the groups point to a number of barriers to profitability for cattle producers.

Cattle producers are facing higher feed costs with the spike in grain prices and are putting a lot of cattle on feed compared to one year ago.

"Soaring input costs, devastating weather patterns and beef-processing woes have resulted in enormous barriers to producer profitability," the letter said. "Further, supply chain disruptions caused by COVID-19 have exacerbated these existing problems and severely impacted America's cattlemen and women."

This past week Sen. Charles Grassley, R-Iowa, said he is working with Sen. Dick Durbin, D-Ill., chair of the Senate Judiciary Committee, and Sen. Amy Klobuchar, D-Minn., who chairs the antitrust subcommittee, about holding a hearing specifically on some cattle market issues, https://www.dtnpf.com/….

"We've seen four beef packing companies making significant profits at the expense of U.S. beef consumers and independent cattle producers," Grassley said. "These powerful companies have limited competition, and it's our responsibility to hold congressional hearings."

The Big Four beef packers include Tyson Foods, JBS, Cargill and National Beef. Tyson and JBS, both public companies, recently reported strong quarterly profits in their beef sectors due to high demand. Cargill and National Beef are private companies and do not release income information.

INDUSTRY WISH LIST

In a letter to agriculture committee leaders on Tuesday, the group of 37 state cattle associations led by the National Cattlemen's Beef Association, laid out a number of issues the industry wants lawmakers to address.

No. 1 on the list is expanding transparency in what the groups say is a "highly complex" cattle market.

The group asked for the reauthorization of the Livestock Mandatory Reporting Act of 1999. The program requires major meatpackers to regularly report market information to USDA's Agricultural Marketing Service. USDA uses this information to report cattle prices, trade volumes and other market information to the public.

The act was last reauthorized in 2015 and the current authority expires on Sept. 30, 2021.

"We continue to urge Congress not to allow this vital program to lose its congressional authority," the cattle groups said in the letter. "The result would be a catastrophic and instant loss of market transparency, price discovery and information designed to improve cattle producers' negotiating leverage. Timely reauthorization of LMR is imperative."

The groups said they would like to see more information provided to USDA-AMS.

Currently, the swine industry benefits from the publication of a contract library at USDA-AMS, which is a searchable database of all formula contracts between hog producers and processors.

"NCBA supports the establishment of a similar contract library for cattle so that producers can compare their marketing methods to those of others," the letter said. "The availability of this information may aide cattle producers in capturing more value for their livestock."

EXPAND PROCESSING CAPACITY

The groups also asked congressional leaders to find ways of promoting the expansion of beef-processing capacity.

"Currently, cattle inventories are cyclically high and U.S. beef demand, at home and abroad, is at near-record highs," the letter said. "Unfortunately, while meatpackers realize massive profit margins, cattle producers are not seeing those earnings passed onto them. In fact, fed-cattle prices have yet to meet or surpass pre-COVID levels. The cause of this imbalance can largely be attributed to a nationwide shackle-space shortage."

The groups point to a 2020 study by Rabobank that found excess operational beef-processing capacity fell to zero in late 2016 and "turned negative" in 2017 and remains there today. The study also found the industry could accommodate an additional 5,600 shackles of daily processing capacity, or about 1.5 million additional animals annually.

"As the domestic cattle herd enters another year of cyclical contraction, worsened by the drought, more processing capacity will strengthen producers' leverage position, increase the value of live cattle, and result in firmer prices," the groups said in the letter.

"Meatpackers face substantial challenges of their own, with labor being the most severe. However, the greatest barrier to entry for small meat processors is access to capital."

The groups said the average cost to construct a meatpacking plant is about $100,000 for every 25-head facility.

"Further, the risk profile of a packing plant is extremely high, making traditional financing difficult to acquire," the letter said.

Reps. Darren Soto, D-Fla., and Dusty Johnson, R-S.D., introduced legislation last year that would authorize federally guaranteed, low-interest loans and grants to small businesses and rural ventures to build new beef processing facilities.

"We urge Congress to swiftly enact similar legislation to support the addition of more shackle space to benefit cattle producers," the letter said.

"NCBA not only advocates for the addition of more processing capacity, but also the strategic support of existing processors. Currently, facilities inspected by a state meat and poultry inspection program, as opposed to USDA's Food Safety and Inspection Service, are generally not eligible to sell products into interstate retail markets. This restriction, while rooted in food safety concerns, hinders the processor's ability to move meat products, and thus can slow live animal processing."

The groups also ask for measures to help expand available labor in the industry. In particular, the groups said assistance provided to the industry during the COVID-19 economic shutdown was helpful but may be hindering the industry in addressing labor needs.

"The beef-supply chain cannot function properly without a steady stream of labor," the letter said. "Absent changes to COVID benefits for individual workers, NCBA believes changes to the H-2A program to include year-round labor is one viable solution to our labor shortage. Additionally, the ability to obtain year-round labor for employment at processing facilities, feed yards, and cow-calf operations will continue to be a struggle for the cattle industry without a multi-faceted approach to address a number of weaknesses that exist from pasture to plate."

DIFFERENTIATING PRODUCTS

The industry also asks the congressional leaders to consider new measures to help producers differentiate their products, while standing opposed to mandatory country-of-origin labeling.

"As more consumers continue to be interested in, and concerned about, the environmental footprint, nutritional quality, and healthfulness of the foods they eat -- as well as where and how those foods were produced -- it is critically important that food product labeling promote honesty and fair dealing in the interest of consumers," the letter said.

The groups said the MCOOL issue was settled by the World Trade Organization. The WTO issued a $1 billion judgement in favor of Mexico and Canada.

"We must shift our focus from aged policies like MCOOL to more realistic solutions that allow U.S. cattle producers to truly differentiate their products and capture consumer demand for local and regionally sourced meat products," the letter said.

"NCBA and its affiliate organizations greatly appreciate Congress' swift action to protect the cattle and beef industries, as well as our domestic food supply chain during these difficult times."

Read the letter here: https://mcusercontent.com/…

Todd Neeley can be reached at todd.neeley@dtn.com

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Todd Neeley