The rapidly spreading cow disease Mycoplasma bovis is a “risk on the radar” for the economy as a decision looms on whether to switch focus from eradicating to managing the illness.

The outbreak was first reported in July last year, and the Ministry for Primary Industries (MPI) has so far ordered the slaughter of cattle from 39 infected properties.

MPI expects to decide by the end of this month on whether to continue with attempts at eradication or switch its focus to managing the disease.

The ministry is half way through the process of culling 22,000 cows and Agriculture Minister Damien O’Connor has said there was up to 60,000 in affected areas that had been identified.

“It’s becoming more of an issue, that’s for sure, as more farms are found to have the disease,” said BNZ economist Doug Steel.

Steel said the numbers were still small, relative to the 6.5 million-head cow herd, but the disease represented higher costs, lower productivity and lower farm confidence.

“That lack of confidence, the increased costs, and the increased uncertainty, can only dint investment,” Steel said. “And that will certainly affect growth.”

The market’s view of the disease had changed since last July, when it was viewed as just a localised outbreak, Steel said.

“We are beyond that point now,” he said. “We are starting to think about how much is it going to hurt the economy and in that sense it is a risk on the radar.”

Restrictions on cattle movement would reduce the efficiency of the dairy and beef sectors.

“At this point it’s that uncertainty – when are we going to stop finding new ones. The uncertainty squashes investment and activity,” he said.

“I think it is a risk. That’s very much the way we are looking at it. It is very much dinting activity – it’s just a question of how much.”

For the moment Westpac chief economist Dominick Stephens said the disease did not pose a risk to the economy.

“The farming industry is looking at the possibility of an increased bill, which will have an impact, but what we have to date is not large enough to really materially affect the overall macroeconomic outlook,” Stephens said.

The total of 78 farms identified as being either infected or under restricted place notices is equivalent to 0.7 per cent of New Zealand’s 11,700 dairy herds.

ASB rural economist Nathan Penny said the impact of the disease would become clearer once the ultimate form of management – containment or eradication – became known.

“The question we will struggle with is getting an idea of actually how widespread it is,” Penny said.

Longer term, Mycoplasma bovis had the potential to reduce industry productivity through increased animal health costs and lower production of infected animals, he said.

With New Zealand the leading dairy exporter of whole milk powder and butter, lower local dairy production would normally be offset by higher dairy prices.

“Nonetheless, there is a risk that Mycoplasma bovis’ impact on net dairy incomes is negative, particularly in the short term as management of the disease may take time to develop,” he said. “In addition, we anticipate that the impact may be more pronounced in some regions than for others.”

New Zealand cow slaughter rates are tracking ahead of last year as the compulsory culling of cattle on properties infected swells volumes, which is weighing on prices.

“The attempted eradication of the M. bovis disease from New Zealand is disrupting the local market,” AgriHQ analyst Reece Brick said in his monthly sheep and beef report.

“More than 11,000 cattle (primarily dairy cows) have already been processed, but the number of farmers under quarantine is rising rapidly. Either a lot more cattle will need to be culled or attempts to eradicate the spread will be cancelled.”

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