The meat supply chain is bracing for potential fallout from a disruption in production as the world’s largest meat producer rebounds from a devastating cyberattack.
JBS S.A., a Brazilian meat processor that supplies 275,000 customers worldwide and operates facilities in 20 countries, altered its production schedule on Monday and Tuesday after a cyberattack brought down its systems. This included a complete shutdown of many North American plants on Tuesday.
The company reported to national media outlets that production would resume today at most of its plants, but did not indicate when it would return to full capacity.
The JBS plant in Plainwell, which employs more than 1,200 people, was among the facilities that closed on Tuesday.
John Cakmakci, president of United Food and Commercial Workers Union Local 951, told the Detroit Free Press on Tuesday that the facility would resume production today and would be fully operational “in a few days.”
Supply chain challenges
Even a short-term outage is significant for a company that processes around 20,000 cows a day, or a quarter of U.S. beef processing capacity.
The U.S. saw a 22-percent drop in cattle slaughtered on Tuesday from the typical 121,000 to 94,000, according to the U.S. Department of Agriculture. The U.S. also slaughtered roughly 390,000 hogs on Tuesday, a nearly 20-percent decline from the typical 485,000.
Industry publication Daily Livestock Report noted that the brief shutdowns would cause distortions in the spot market, leaving major retailers and food services to scramble to find supplies.
Smaller players that order from the spot markets can expect serious hardships in the short term.
While the shutdowns will have short term ramifications, pork and beef prices were already high and trending upward as summer approaches.
Current choice beef cutout value is around $340 per 100 pounds. In June of 2019, beef was valued at $220 per 100 pounds.
Similarly, pork cutouts sit at $125 per 100 pounds compared to just more than $80 at the same time in 2019.
“The tendency will be to view the attack as the reason why prices are going up and, if consumers panic, that could end up being a self fulfilling prophecy,” according to the Daily Livestock Report. “The reality, however, is that prices will be up due to the fact that processing capacity simply cannot keep up with the level of demand currently in the market.”
Panic buying unnecessary
Dave Hazekamp, president of Muskegon-based Hazekamp’s Premier Foods Inc., said his company was told to source from other suppliers in the short term.
Hazekamp, whose meat processing and distribution facility produces a line of consumer-ready products, predicted that his company would experience minimal effects as it also sources from other meat processing heavyweights Smithfield Foods Inc., Tyson Foods Inc. and Cargill Meat Solutions Corp.
Hazekamp said he expects retailers to run into short-term shortages, but echoed sentiments in the Daily Livestock Report in cautioning against panic buying.
“The commodity food business has been hand-to-mouth for a year or so now,” he said. “In other words, not a lot of excess capacity in the system on the harvest and processing end of the business.
“Right now, any change impacts the price in most commodity markets. Again, the key is not to create a panic situation, but with perishable food, the snapback or recovery is generally much faster.”
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