Business case for cattle disease plan kept secret from public

The cost-benefit analysis behind the $886 million decision to try to eradicate Mycoplasma bovis is being kept secret from taxpayers picking up most of the bill. Photo / Alan Gibson

The cost-benefit analysis behind the $886 million government-agriculture sector decision to try to eradicate Mycoplasma bovis is being kept secret from taxpayers picking up most of the bill.

A Herald request to the Ministry for Primary Industries (MPI) for a copy of the cost-benefit analysis is being treated by MPI as an Official Information Act request, which normally means waiting nearly a month for a response, with no guarantee of full disclosure.

When the Herald tried to clarify that the cost-benefit analysis was not being made public, and if so, who had access to it, the response from an MPI spokesman was: "This has been part of the decision-making process so the decision makers have had access to this information."

The decision to pursue a "phased" eradication programme instead of a long-term management approach to the disease was made by the government and leaders of the dairy and beef sectors, including DairyNZ and Beef+Lamb NZ. Federated Farmers had observer status to the decision-making process.

The full cost of eradication over 10 years is projected to be $886 million. Of this $16m will be borne by farmers as loss of production and $870m is the cost of the response, including compensation to farmers.

The government or taxpayer will meet 68 per cent of the response cost and DairyNZ and Beef+Lamb NZ will pick up 32 per cent, with the government paying the upfront costs.

MPI expects the eradication drive to involve killing 126,000 dairy and beef cattle which carry the bacterium, on top of the slaughter of around 26,000 cattle already under way.

Most of these cattle are currently healthy but are from "known and future infected farms and also highly suspect farms - those under restricted place notices", MPI said.

Seemingly healthy animals carrying the organism could infect others, the ministry said.

Agriculture Minister Damien O'Connor's office, when asked why the cost-benefit analysis was not publicly available, said the Cabinet paper would be online "in a day or so".

The Herald understands the analysis and economic modelling behind the decision-making process was done by MPI economists with input from the affected sectors. But it is understood the model itself was not seen by the contributors.

The alternative option for tackling M bovis, long-term management, had farmers bearing the cost of an estimated $698m in loss of production. Response costs would have been $520m.

Independent economist Cameron Bagrie said he was looking forward to studying the cost-benefit analysis.

"Hopefully it is very robust."

Independent economist and dairy industry specialist Peter Fraser was also keen to see the analysis.

"The economic costs don't seem that high. Critically the meat is still edible so there is no trade or food safety risk. Indeed, rather than being an economic problem - we just end up on the same level playing field as everyone else (our trading partners) - one of the major problems appears to revolve around animal welfare," Fraser said.

"Given a spend of about $1 billion, an NPV (net present value) analysis suggests benefits are sub-$100 million and that's nickels and dimes, about 6c on the milk price (per kg milksolids)."

Federated Farmers president Katie Milne, who was privy to the decision-making, could not be contacted for comment. Her deputy Andrew Hoggard, a dairy farmer, said he had not seen a business case. He had only been given an information summary.

"It was all kept reasonably tight among those who made the decision."

Prominent agribusiness commentator and former Lincoln University professor Keith Woodford has said a debate over why taxpayers should be liable for trying to eradicate M. bovis would be "legitimate".

Bagrie said: "On the face of it expecting the taxpayer to bail people out of what could be considered to be a corporate risk could be setting a worrying precedent. Even if you benchmark this against the kiwifruit industry (Psa disease crisis), in this one the taxpayer is paying a much higher percentage.

"But there is a caveat here. An eradication scenario is difficult. It doesn't look ideal in terms of what it means for the taxpayer as compared to what we've seen in other [biosecurity] events but there are different circumstances.

"The real cost is going to be eradication and if they're going to get serious about eradication, central government has to run that. It has to be central government-led."

Asked why taxpayers should support farmers' private enterprise problem, Hoggard said the whole economy, including businesses that relied on servicing farming, would suffer if the more expensive, long-term management or learning to live with it approach had been chosen.