Meat Supplies Tighten as Cyberattack on JBS Snarls Food Chain

A ransomware attack against

JBS SA


JBSAY -0.33%

sent shock waves throughout the U.S. food industry and exacerbated tension between Washington and Moscow, even as the meatpacker restarted plant operations.

JBS said most of its plants resumed operations Wednesday, though some shifts and processing operations remained suspended, according to individual plants’ social-media posts.

“We anticipate operating at close to full capacity across our global operations tomorrow,” said Andre Nogueira, chief executive of JBS’s U.S. operations.

The White House, which said that JBS reported that the attack originated from a criminal group likely based in Russia, said President Biden plans to bring up the problem of ransomware during a summit with Russian President

Vladimir Putin

in Geneva on June 16.

Asked at the White House on Wednesday whether he would retaliate against Russia over the cyberattack, Mr. Biden said: “We’re looking closely at that issue.” Russian officials didn’t immediately respond to a request for comment.

The attack on JBS this week knocked out production at plants that process nearly a quarter of the beef and a fifth of the pork produced in the U.S., pushing up wholesale meat prices while complicating livestock deliveries from farms.

Chicken plants operated by

Pilgrim’s Pride Corp.

, a subsidiary of Brazil-based JBS, the world’s biggest meat company by sales, were also affected. Florida-based grocery chain Publix Super Markets Inc. said the plant closures could lead to intermittent shortages of chicken over the next few days.

The outages are the latest blow to a meatpacking industry that is also contending with labor shortages and high costs for transport and animal feed. Wholesale prices for beef and pork rose following the attack, and meat buyers said price increases for consumers would likely follow if problems persisted. Prices for choice cuts of beef sold in boxes rose by $5.60 to $340.16 per hundred pounds on Wednesday, marking the biggest increase in at least a month, according to U.S.

Department of Agriculture

data.


‘We’re grabbing product from every other source.’


— Jagtar Nijjar, executive at distributor Gordon Food Service

John Stevens, director of purchasing for G&C Foods, a supplier to restaurant distributors, said he expected prices to climb further if plant outages continue. “The longer it goes the more we’ll see,” he said.

Mr. Stevens said he spent Tuesday fielding calls from restaurant distributors racing to find alternative supplies of the beef, pork and chicken they typically order from JBS and Pilgrim’s. G&C, which purchases millions of pounds of meat and poultry from the companies each year, bought meat from other meatpackers, and might ration deliveries to customers if supplies tighten in coming days, he said.

“There’s only so much volume to go around,” Mr. Stevens said. He said JBS told him that orders for meat already on the road would be delivered, but that it was unclear if or when other orders in the pipeline would arrive. JBS said that nearly all of its U.S. plants delivered products on Tuesday.

The USDA said it had contacted several major meat processors to encourage them to add capacity where possible. The agency said it would continue to encourage U.S. food and agriculture companies to take steps to protect their information technology and supply chain infrastructure.

Meat supplies were already tight before the cyberattack. Surging demand from reopening restaurants, along with production problems at meat plants, are driving up costs of bacon, chicken wings and other products as people continue to make big grocery purchases. Some restaurants and supermarkets have raised prices for consumers as a result.

Distributor Gordon Food Service Inc. bought meat from other suppliers Tuesday while JBS plants were offline, said Jagtar Nijjar, Gordon’s director of imports and commodities. Mr. Nijjar said he expected it to take four business days for its normal order flow from JBS to resume. Normally, he said, Gordon gets more than half of its pork from JBS, at least half a million pounds every week.

A Melbourne, Australia, facility of JBS, the world’s biggest meat company by sales.



Photo:

Carla Gottgens/Bloomberg News

“We’re grabbing product from every other source,” Mr. Nijjar said.

U.S. cattle producers, meanwhile, said they were waiting to learn whether they would be able to deliver animals to JBS plants on schedule this week. U.S. meat companies slaughtered 105,000 cattle and 439,000 hogs on Wednesday, down 13% and 9%, respectively, from a week prior, according to USDA data.

Dave Stevenson, general manager of Red Rock Feeding Co. in Red Rock, Ariz., said he was unsure whether he would be able to deliver more than 70 cattle to a JBS plant near Phoenix as planned on Friday. Animals he had shipped to a JBS plant in Utah on Monday were still waiting to be slaughtered on Tuesday, he said.

The United Food and Commercial Workers International Union, which represents over 25,000 JBS meatpacking workers, called on the company to ensure all its workers would continue to receive pay as plant shutdowns continue. A JBS spokesman said workers will be paid according to the terms of the company’s contract.

The cyberattack hit JBS operations outside the U.S. as well. The company’s Canadian beef operations on Wednesday were set to resume normal slaughtering and processing operations, the company told workers in a notice posted on Facebook.

In Australia, several thousand meat workers temporarily stood down on Wednesday while JBS worked to bring operations in the country back to full capacity, said Matt Journeaux, an official at the Australasian Meat Industry Employees’ Union.

“They have no idea when this is going to be rectified or if there is any end in sight,” he said.

The Australian arm of JBS uses the same computer system as the company in the U.S., which is why operations in both countries were affected, said

David Littleproud,

the country’s agriculture minister.

Mr. Littleproud said processing of beef, lamb and pork was disrupted by the attack, the latest blow to Australia’s meat industry after a prolonged drought reduced livestock numbers. JBS accounts for roughly a quarter of Australia’s red-meat processing.

“It’s also important to understand it’s not just JBS that’s impacted by this, it goes right back to the farm gate and obviously they’re working as hard as they can to make sure that there’s continuity in that supply chain,” Mr. Littleproud said.

Australian authorities are meeting with U.S. law-enforcement agencies to pinpoint the source of the attack, Mr. Littleproud said.

A cyberattack on the U.S.’s largest fuel pipeline on May 7 forced a shutdown that triggered a surge in gas prices and shortages in parts of the Southeast. WSJ explains just how vulnerable the nation’s critical energy infrastructure is to attack. Photo illustration: Liz Ornitz/WSJ

Companies at Risk of Cyberattacks

More WSJ coverage on hacking attacks, selected by the editors.

Write to Jesse Newman at jesse.newman@wsj.com and Jacob Bunge at jacob.bunge@wsj.com

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