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Ransomware Attack Roiled Meat Giant JBS, then spilled over to farmers and restaurants



Employees at the US branch of JBS TO,

JBSAY -1.29%

the world’s largest meat company, noticed something wrong in their computer systems during Memorial Day weekend, the unofficial kickoff for the busy summer barbecue season.

The culprit, a ransomware attack, did not just hit its target – it created the U.S. food industry, from pig farms in Iowa to processing plants in small towns and restaurants in New York. The hack triggered a domino effect that led to an increase in wholesale meat prices, backed up animals in stables and forced food distributors to quickly search for new suppliers.

The attack was the latest clash between cybercriminals and companies integrated into the functioning of the US economy. It was yet another disruption for the U.S. food industry after the Covid-1

9 pandemic last year forced weeks of plant shutdowns, and this year an economic recovery has stretched suppliers’ ability to meet demand.

After identifying the intrusion early Sunday, May 30, JBS said it warned U.S. authorities and set three goals: determine which operations could be run offline; restart systems using backup data; and press experts to handle negotiations with the attackers. By the afternoon, the company had concluded that encrypted backups of its data were intact, said Andre Nogueira, CEO of JBS USA Holdings Inc.

Greeley, Colo., Beef production facility at JBS, the world’s largest after-sales meat company.


Photo:

Michael Ciaglo / Bloomberg News

On Memorial Day on May 31, JBS staff, FBI agents, and cyber security specialists worked at JBS ‘U.S. headquarters in Greeley, Colo., To get systems back online. They had prioritized JBS’s shipping platform so that the company could resume moving meat to customers.

The farmer

Just before On Monday, Dwight Mogler strolled through a cemetery in Lyon County, Iowa, near his family’s farm. He ignored a call when talking to his 16-year-old son about the victims of veterans buried there. A follow-up text message from his logistics manager caught his attention.

“Hi, Dwight, JBS had some sort of cyber attack and I’m not really sure what’s going on, but I have to put your loads on hold for now,” the message reads. Sir. Mogler said he briefly wondered if the U.S. meat industry was under attack from Russia or China.

Mr. Mugler phoned Tuesday morning to look for other buyers of the pigs he was to deliver that day to a JBS facility in Worthington, Minn. He ran into a new problem: suspended operations at JBS had left more pigs in the U.S. market, pushing prices down. He found competing plants in Iowa and Nebraska to take his pigs, but Mr. Mogler estimated that lower market prices cut about $ 17,000 from his sales this week.

“We already have a lot of volatility, it has just amplified it in the market,” said Mr. Muggles delivering other pigs to JBS’s Worthington facility on schedule later this week.

The senator

Sir. Nogueira called up Tuesday with Senator Chuck Grassley (R., Iowa). Grassley, himself a farmer, has criticized the meat packaging industry for being highly consolidated among a handful of large companies.

Sir. Grassley had met with livestock producers who were concerned that the cyber attack could harm their business, he said in an interview. The senator wanted to know how long JBS operations could be down and whether he could help. They discussed how cryptocurrencies like bitcoin made it easier for cybercriminals to launch ransomware attacks and cover their tracks.

Mr. Grassley and Mr. Nogueira understood the consequences of unexpected slaughter interruptions. Covid-19 infections among plant workers in the spring of 2020 forced large slaughterhouses to close for several weeks at a time and backed up with livestock on farms, leading farmers to kill tens of thousands of pigs.

The restaurant

Food retailers who were already struggling to get enough meat when restaurants reopened were running to replace beef, pork and chicken orders they had placed through JBS. Some who typically buy meat from other suppliers bought more than they had planned, in case of a prolonged increase in wholesale prices.

As JBS processing activities were largely offline on Tuesday, the number of cattle and pigs slaughtered in the United States declined, tightening meat supplies and increasing wholesale prices for beef and pork. The prices of boned pork cuts used to make grilled staples like pulled pork rose 25% last week to a record $ 2.48 a pound, according to a distributor.

Employees at JBS Production Facility in Greeley, Colo., June 1st.


Photo:

Michael Ciaglo / Bloomberg News

For Billy Joe’s Ribworks, a grill connection overlooking the Hudson River in New York, pork prices jumped 40 cents per pound last week, owner Joe Bonura said.

Sir. Bonura, who said he passed a ransomware attack on a hotel he owns earlier this year, said the higher meat prices came on top of other rising costs he pays for many goods and services when the economy opens again. “It’s every little thing and we have to eat it, we can not continue to raise prices,” he said.

Payments

On Tuesday night, progress was made in getting JBS’s systems back online using backup data, Nogueira confident enough to issue a statement that the majority of JBS facilities would be operational on Wednesday, June 2nd.

The company’s consultants continued to negotiate with the hackers. Although forensic analyzes conducted by JBS and its specialists showed that customer, supplier or employee data had not been compromised, Nogueira, cybercriminals, said they had caught some.

JBS’s cybersecurity experts warned that the attackers may have left some way behind. After JBS resellers and hackers reached an amount of $ 11 million – far less than the original demand, Nogueira said, he said – he decided to pay.

JBS sent the payment as a lump sum in bitcoin, Nogueira said. Afterwards, he said, the attackers attacked that they had not captured JBS data. Sir. Nogueira declined to say which day JBS made the payment. The cost of the attack, he said, would be irrelevant to JBS, which by 2020 generated $ 53 billion in sales globally.

Tom Robinson, chief researcher at Elliptic, a UK-based blockchain analysis and compliance company, said a payment of 301 bitcoin worth approx. $ 11 million at the time was made shortly after noon. 19 ET Tuesday, June 1st. He said that on factors including the date of the transaction and the exchange from which it was made, he believed it was the JBS payment.

On Thursday, June 3, JBS said all of its facilities were fully operational. Sir. Nogueira said that by the end of the week, JBS had lost less than a day’s production and that its speed to complete sales orders was only 3% below the normal level, less than the effect the company could see from a severe storm.

After the attack, Nogueira said he received supportive messages from other companies that had handled similar intrusions. “Criminals will continue to be more sophisticated,” he said. “We need to keep up with our investments.”

Rep. Carolyn Maloney (D., NY), chair of the House Monitoring Committee, on June 10 asked JBS to provide documents and communications related to cyberattacks and ransom payments as lawmakers consider ransomware and cyber security legislation. A spokesman for JBS said the company would comply.

Slaughter of livestock increased again later in the week when JBS plants came back online, USDA data show. The USDA said this week it would invest more than $ 4 billion to strengthen and diversify the food system, including investments in small and medium-sized meat processing facilities. Agriculture Secretary Tom Vilsack said it was important to protect markets and consumers from such disruptions as cyber attacks become more frequent.

“Certainly JBS learned a few things from this,” said Mr. Vilsack. “Hopefully this is a wake-up call for everyone.”

Cyber ​​attacks and business

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

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