TIME will be the factor that dictates the degree of impact that JBS and its customers sustain as a result of the weekend cyber security breach, which has temporarily disabled the company’s operations in Australia and North America.
As JBS completes its second ‘lights out’ day across its Australian red meat processing operations following the cyber-security breach over the weekend, the full extent of the impact is still being measured.
The company’s US Beef division, which includes beef and lamb operations in Australia, overnight issued a statement on the cyber security attack:
On Sunday, May 30, JBS USA determined that it was the target of an organised cybersecurity attack, affecting some of the servers supporting its North American and Australian IT systems. The company took immediate action, suspending all affected systems, notifying authorities and activating the company’s global network of IT professionals and third-party experts to resolve the situation. The company’s backup servers were not affected, and it is actively working with an Incident Response firm to restore its systems as soon as possible.
The company is not aware of any evidence at this time that any customer, supplier or employee data has been compromised or misused as a result of the situation. Resolution of the incident will take time, which may delay certain transactions with customers and suppliers.”
As the security breach continues to unfold, more is being learned about the impact across the business.
Like all large meat processors, virtually every part of the modern JBS processing business is heavily reliant on computer systems and internet connectivity for record-keeping, regulatory documentation, sortation and countless other functions.
Some of the immediate challenges presented since the breach was discovered on the weekend include what happens to thousands of chilled carcases from cattle slaughtered on Friday, that have yet to be boned-out.
The company has provided no further comment today, but Beef Central understands attempts will be made to bone those bodies out tomorrow using manual record keeping, documentation and sortation. At some sites, including JBS Beef City, many of those ‘stranded’ carcases are high-value Wagyu being serviced killed for other supply chains.
Some observers have suggested that as a result, the resultant boxed meat is more likely to remain on the domestic market than go into export, because of challenges in shipping documentation, labelling, inventory and other record keeping without IT and computer support.
Some large domestic kill customers, including supermarket giant Coles, which gets processing done at several JBS sites including Brooklyn and Scone, are already making arrangements for temporary kills at other processing sites, Beef Central has been told.
Supermarkets and other large end-users like the McDonald’s burger pattie supply network will be some of the most immediately impacted customers, due to their need for consistent supply, if the current stoppage lasts for any significant length of time.
Another immediate challenge faced by the company and its suppliers is recently-killed cattle that have been ‘caught in limbo’ in terms of livestock payment – but Beef Central understands that JBS has told industry contacts that producers have to this point been ‘incredibly understanding’ about the company’s current predicament.
There has been little or no impact seen in cattle prices or meat prices since the crime was disclosed.
Wholesale meat traders this morning said there had been no upwards movements evident in prices since Friday that could be blamed on supply shortages caused by the JBS closure. The only exception might be a little ‘opportunistic’ trim trading, up 20-30c/kg in places, but nothing ‘significant,’ Beef Central was told.
“Nobody could have foreseen this coming, but it represents a problem of incredible proportions for the company,” a veteran red meat processor told Beef Central this morning.
“All meat companies no doubt spend large amounts of money on cyber security, but it just proves how vulnerable all business may be to breaches – large or small.”
“This will create logistical problems right up and down the supply chain. It’s going to put enormous hardship on the JBS operations,” he said.
Beef Central’s inquiries indicate that while cyber breach insurance is offered by some business insurance providers, premiums for protection are so high that few, if any Australian meat processors can afford them.
The Australian Federal Police are now involved in investigations into the cyber breach, the ABC news reported yesterday.
Time is the enemy
However time is clearly JBS Australia’s enemy at this point. The longer the company’s operations remain in a state of IT paralysis, the deeper the potential damage will be to the business, and potentially to some of its customers.
Should normal operations resume in a day or two, that damage will be contained, and relatively minor. But if it drifts on into week-two, week-three or week-four – as some fear it may – the impact will be far more profound.
Comments in the company statement published above, suggesting that “resolution of the incident will take time,” hardly add to confidence that operations will recommence in coming days.
Having said that, the direct impact of the cyber-security breach is yet to be seen in the company’s US beef, pork and chicken operations, because of international time differences, and the fact that yesterday (Monday) was a national Memorial Day public holiday in the US. More will be learned about operational decisions and/or plant closures in the US from tomorrow.
Compounding the challenges, email and telephone communication with the company continues to be impacted by the IT breach.
Impact on domestic red meat supply?
The Australian Meat Industry Council issued a statement this afternoon saying it supported JBS Australia’s* position that the cyber breach was a commercial matter, and is being handled by JBS operations globally and in Australia.
As this stage, there was no indication whatsoever that the cyber attack would cause a major impact on Australian domestic red meat and pork products supply, AMIC said.
“The Australian meat industry has systems in place across the supply chain to deal with these types of issues, including managing livestock through the system effectively and access to cold storage for meat supply,” AMIC chief executive Patrick Hutchinson said.
“The strength and flexibility of the red meat and pork products supply chain has been demonstrated in the past on market access issues and COVID impacts. That is why we are world-renowned as the most reliable meat supply chain globally.”
Mr Hutchinson said AMIC continued to monitor the situation closely.
* JBS is not a member of the Australian Meat Industry Council.