Livestock producers and processors could only watch and wait last week as JBS, the national leader in meat processing, tried to get plants running following a holiday weekend cyber attack by foreign hackers.
While the event had quick reactions for feedlots and market players, experts are still considering possible long-term market impacts following the event.
“Right after the attack occurred over the weekend, obviously we saw markets take a pretty decent dip — feeder and live cattle contracts both went down considerably,” said Trent Milacek, Oklahoma State University Extension area agricultural economics specialist. . “August feeder cattle contracts traded as low as 145 during that session, but then closed somewhere around 150. So a lot of emotion and a lot of volatility came from that event.”
In the days after the attack, trading continued to be choppy especially in feeder markets, eventually leveling out near the end of the week. Milacek said most of those quick market changes could be attributed to emotion.
“JBS is such a big company. On Tuesday, we saw a 22% reduction in cattle slaughter and that directly coincides with their share of processing,” Milacek said. “With that in mind, there’s no surprise that we would see a big price movement. And it was also not a big surprise to me that we saw markets kind of immediately recover.”
Although the JBS incident was an important event in cattle and protein markets, and obviously an event processors and cattlemen wanted to avoid, it was still a short-term disruption. Long-term impacts from such a brief disturbance in the supply chain can be negligible, especially with volatility already created by so many other market factors.
“The cattle market has already been incredibly volatile due to the increase in grain prices,” Milacek said. “Figuring out what noise was in the market before this occurred and then now what part of that volatility is being contributed due to this event would be pretty difficult task to accomplish.”
The increasing frequency of disruptive events in cattle markets and the overall food supply chain has made producers as well as consumers understandably sensitive to market swings. Milacek said that increased awareness is a good opportunity for producers to re-evaluate their marketing strategies.
“I do think it opens our eyes, yet again, to being diversified in our marketing strategies and it might affect how some people look at marketing their animals,” Milacek said. “I like to suggest that producers have opportunities to market into several different windows. So in case you experienced one of these events, you're not stuck marketing into a price decline that generally has a way of correcting itself given enough time.”
Milacek said the events of 2020 and 2021 have provided analysts with good data points for measuring and anticipating market reactions as well as experience dealing with long-term food supply disruptions.
“So obviously whenever you start seeing shelves become bare, more people in the public start to get interested in how the food supply works and how these disruptions can affect it,” Milacek said. “So on one side, we're learning a lot and the general public is becoming more aware of where their food comes from, for sure. But, the more things like this happen, the more media attention they get, you're going to continue to see a lot of market interest in these little disruptions.”