Billings Gazette: JBS ransomware attack a gut check for Montana ranchers

by Tom Lutey

This week’s ransomware attack on the world’s largest meatpacker was a gut check for Montana ranchers, still weary after slaughterhouse slowdowns during the previous two years.

The attack, attributed to Russian hackers by the FBI, shut down JBS meatpacking plants for a day and half, during which the U.S. meat processing fell by more than 40,000 carcasses. National news stories zeroed in on whether there would be meat shortages and, of course, higher U.S. retail prices for beef and pork. JBS accounts for 20% of the U.S. supply.

Ranchers understood the shutdown differently, having suffered the economic consequences of a packing plant slowdown in 2019, followed by COVID-19 stifling meat processing in 2020.

Cattle sales, including calves, were a $1.27 billion share of Montana’s economy in 2020, according to U.S. Department of Agriculture. Although the head count compared to previous years remained stable, total sales values were at their second lowest in a decade. Montana sales values were third lowest in a decade at $1.35 billion in 2019, with meatpacking problems playing a role.

Sure, less processing means less meat in grocery stores, but it also means there’s less demand for cattle to slaughter. Any kink in the ability to process U.S. beef usually drives down the price that ranchers are paid.

“In this situation, we are monitoring it very closely. We’re concerned with the situation and these types of attacks,” said Jay Bodnar of the Montana Stockgrowers Association. “There are concerns about the supply chain impacting Montana producers, Montana ranchers.”

By week’s end, JBS was putting the ransomware attack behind it, but the risk of a supply interruption was drawing the attention of ranchers and lawmakers to the larger issues of a handful of large meatpackers controlling more than 80% of what’s cut up in the United States.

“This hack on a major meat processing facility is more proof that consolidation in our ag industry is a threat to our national security,” U.S. Sen. Jon Tester, a Democrat, said in a tweet Thursday. “We must beef up our cybersecurity and provide better oversight of our markets to keep our nation-and food supply-secure.”

The FBI attributed the attack to Russian hackers REvil and Sodinokibi. JBS was hit less than a month after a ransomware attack on Colonial Pipeline limited fuel supply in eastern states for six days.

Rewind to 2019, and Montana Sens. Tester and Steve Daines, a Republican, where calling for an investigation into meatpacker price fixing. That August, a fire at a Tyson meatpacking plant in Holcomb, Kansas, cut into the daily slaughter of U.S. cattle. Ranchers started receiving a substantial cut in payments for cattle as packing plants said they didn’t have capacity for the supply of available cattle.

The low prices lingered into 2020, when restaurant closures due to the pandemic, coupled with COVID-19 sickness among meatpacking plant workers, dealt cattle prices another blow. By March 2020, slaughter cattle that once fetched $1 a pound in Montana auction yards were selling for $0.62 a pound. The price consumers were paying for beef increased 25% at the same time, according to USDA.

The ranchers selling cattle in the auction yards take the price hit early, said Fred Wacker, Miles City rancher. Feedlot owners who attempt to turn a profit by buying light cattle, fattening them up and then selling them into the slaughter system, take a hit, too. An animal the meatpacker doesn’t want because processing has slowed still needs to be fed, which the feedlot owner pays for.

“It just trickles right down. It’s not a good thing. It’s a very bad thing that happens to all of the cattle producers because we need that chain going and we need those cattle being processed,” Wacker said. “That’s what keeps meat going around the United States. That’s what keeps the meat going around the world. JBS is the biggest packer in the world.”

Wacker has a contract to supply natural beef to Whole Foods Market, a deal which involves working with multiple ranches in order to keep Whole Foods refrigerator cases stocked with natural beef raised to the specifications of the grocer. The Whole Foods order is large enough that space has to be preserved for slaughter so that what’s boxed for contract isn’t comingled with other orders.

There isn’t enough kill space in the U.S. meatpacking industry now, Wacker said. It doesn’t take much of a slaughter disruption to turn prices negative for ranchers.