Armstrong: Cyber attack on major meatpacker exposes market vulnerabilities

June 21, 2021
In The News

On May 30, 2021, the world’s largest meat packer, JBS S.A., was the target of a ransomware cyber-attack that forced operations to cease at all of their beef processing plants in the United States, causing significant disruption in the supply chain.

While the growing threat of ransomware attacks presents significant national security and economic threats, this specific attack compounded existing challenges in the cattle market. This attack was a cause of great concern not only for beef consumers, but for the thousands of ranchers across the country who already face uncertainty. The hack had reverberations that drove up wholesale meat prices, backed up the supply of animals, and forced food distributors to search for new suppliers.

This attack demonstrates the fragility of the beef supply chain, where the vast majority of beef processing in the United States is controlled by a handful of large companies. Approximately 80 percent of the market is controlled by just four meatpackers, leaving our meat packing supply chain vulnerable to massive disruptions in the event of such an attack.

It is clear that we need to substantially increase our defenses against cyber-attacks and seek additional means to hold the attackers responsible. We should also consider whether offensive cyber operations, and in what form and context, would deter further actions. In an increasingly digital world and industry, cybersecurity is paramount to protecting our economy, ranchers, and all Americans.

Unfortunately, cyber-attacks are not the only significant challenge that has disrupted the concentrated meat processing market. In 2019, a fire at a beef plant in Kansas, a facility that accounted for only six percent of our nation’s beef processing capacity, created significant market disruptions across the entirety of the supply chain. In 2020, COVID-19 pandemic-related plant closures led to processing capacity shortfalls. While consumer costs rose during these events, ranchers never saw an increase in price for their products.

It is clear we need to address the consolidation of the meat processing industry. Reducing concentration in U.S. beef processing capacity will help insulate the market from further disruptions, providing supply and price stability. This can be done by reducing regulatory barriers to entry that lessen competition, and empowering small and local processors to grow their operations.

We also need to support state efforts to pass regulatory reforms that help ranchers achieve fair and transparent access. Wyoming allows consumers to cut out the middleman and buy meat directly from ranchers though an animal-share agreement, completely outside of the meatpacking market. Allowing states to advance regulatory reforms like this offers both ranchers and consumers more choices.

The JBS S.A. cyber-attack is only the latest example of dysfunction in the meat processing industry. This attack, like other disruptions, has illuminated the instability of the current market situation. We must continue to push for reforms that restore a functioning market to the benefit of ranchers and consumers.