Maybe we just need to go back to old fashioned, hand-written ledgers.
“Received: 22,500 cows.” Then Bob’s initials in a little box to the right. You can’t hack that.
Apparently, around 20% of America’s beef capacity was offline as of Tuesday afternoon after a weekend cyber attack on JBS shut down slaughterhouses and idled plants from Canada to Australia. According to “Beef Central” (don’t laugh) JBS “canceled Monday’s entire beef and lamb kills” down under.
In a statement, JBS USA called the incident “an organized cybersecurity attack” which affected “some” of the servers supporting operations in North America and Australia. All affected systems were suspended and authorities were notified. JBS then “activat[ed] the company’s global network of IT professionals and third-party experts to resolve the situation.”
The company accounts for 25% of US beef capacity and somewhere close to 20% of all pork capacity.
JBS notified the White House on Sunday. Deputy Press Secretary Karine Jean-Pierre said the ransomware attack was the work of “a criminal organization likely based in Russia.” (Go figure.)
In addition to myriad unknowns about how much butchered animal flesh will be available for human mouths in the near-term, the incident also left America in the dark about the price (screenshot below).
If you’ve ever tried to sort through that report, you know it’s almost impossible for the layperson who doesn’t understand the terminology, but thanks to hours spent parsing it last year, when the pandemic forced plant closures, I do know that not having it available is probably a sub-optimal state of affairs. Bloomberg underscored as much. “The price of meat in the US on Tuesday was a mystery,” Michael Hirtzer declared, adding that “even before the cyberattack, wholesale beef was near record prices achieved during the pandemic, with demand surging.”
Needless to say, this has the potential to add another chapter to multiple ongoing stories including “West Vs. Russia” and “Ransomware Vs. Critical Infrastructure.” If it was ransomware and the ransom is paid in crypto, that’s just another argument for a regulatory blitz. (I imagine Rabobank’s Michael Every will have fun with this story in his daily tomorrow.)
Other than that, Tuesday was a bit of a slog for US equities, which started out buoyant only to retreat due, in part anyway, to a lackluster read on the employment subindex of May’s ISM manufacturing report.
Ahead of May payrolls, market participants are sensitive to anything jobs-related. Of course, what really matters when it comes to recouping the ~8 million jobs still MIA is the services sector. I’d say that gives ISM services more market-moving potential that it might have had otherwise, but it’ll be preceded by ADP, so it’s probably more apt to say that if ADP is a miss, any sign from ISM that jobs aren’t being added in the services sector as quickly as everyone hopes would be insult to injury.
Anyway, that’s pure speculation. Stocks remain near record highs, and some say they’re due to de-rate. “PEs have de-rated significantly for the most interest rate sensitive parts of the equity market as rates have surprised on the upside this year,” Morgan Stanley’s Mike Wilson said Tuesday.
“The next phase of derating will likely come via the Equity Risk premium channel, a process we think began with Q1 earnings season,” Wilson added, before noting that “these adjustments are very typical, and should be expected, during the mid-cycle transition period.”
As a generic reminder, it’s all expensive at the asset class level (figure below).
Treasurys bear steepened to kick off June, with yields cheaper by around 2bps out the curve. “The bulk of the bearishness was eroded as Tuesday’s session played out,” BMO’s Ian Lyngen and Ben Jeffery wrote.
“It’s tempting to point toward the slight pullback in domestic equities off the intraday highs (and we’ll emphasize ‘slight’ in this context), however the price action is far better defined as range-reinforcing as the more meaningful fundamental insight offered from the BLS looms on the macro horizon,” they added.
I doubt seriously that market participants can expect much in the way of excitement in the lead-up to May payrolls later this week. If that turns out to be a “knock on wood”-type assertion, all the better. These are the weeks (in June and July) when the lack of discernible narratives and mind-numbing market “drift” tend to conspire with the incessant cicada hum to put me to sleep.