The 14.5 percent of US beef production brought offline by last week’s cyberattack on JBS was recovered within days, but the incident could cast a longer policy shadow over parts of the protein industry.
By highlighting vulnerabilities within a critical private supply chain that emerged as a key node in the spread of covid-19, the hack will intensify lawmakers’ already growing attention to cattle markets.
A tightening of cybersecurity regulation and disclosure requirements seems the most likely near-term response. The JBS attack’s influence on the food and ag sector’s place among other basic industries within ongoing debates about climate reliance, anti-trust and industrial spending policies could prove more important over the long term.
On CNN’s State of the Union Sunday, Senator Angus King said the fact that 85 to 90 percent of US critical infrastructure is privately held helps make cyberattacks like the one against JBS such a complex challenge. He said new legislation and liability protections will likely be necessary to compel information sharing by owners of “systemically important critical infrastructure” that includes elements of the US energy, financial and water systems.
“We need essentially an entirely new relationship between the private sector and the federal government. I realize the term ‘relationship between the private sector and federal government’ is kind of an oxymoron, but that’s what we have to establish,” he said. “It’s got to be burdens and benefits, particularly for these important critical infrastructure pieces.”
A March report from the US Director of National Intelligence highlighted supply chain security as a key strategic objective within the current National Counterintelligence Strategy. It described adversaries’ attacks on the US economy and critical infrastructure as a “strategically important” threat that will require enhanced outreach and partnership with the private sector.
“The current administration really has signaled they’re wanting to take a deeper look into how food production works – whether that’s from a climate perspective or a food security perspective,” Rabobank animal protein analyst Dustin Aherin told Agri Investor.
Aherin said the JBS hack is the latest in a series of events that have drawn attention to the concentration of ownership in the beef packing sector, including a fire that destroyed a key Tyson processing plant in August 2019, covid-19 and extended cold temperatures that knocked production offline earlier this year.
Over the past year and a half, he said, there has been considerable discussion about, and some action on, state and federal support for small beef processors, but the scale of spending has been far from anything that would meaningfully improve their market positions.
Aherin noted that while the USDA and the Department of Justice have initiated an anti-trust investigation that is watched closely by cattle industry organizations, there is broader interest in how carbon banking, renewable fuel and other policy changes could have more immediate impact.
“It’s not so much whether the government is more involved, but if they are involved in the right way,” he said.
Investors often reject government intervention with the same reflex that inspires King to label the new relationship with the private sector he seeks as an oxymoron.
Whether or not the JBS hack or the Colonial oil pipeline attack that preceded it does help bring about creation of that new relationship, the allusion to “benefits” to accompany “burdens” in the effort suggests the blurring line between national security and the private sector could bring new forms of opportunity for leading agricultural investors in the years ahead.