The Government has put aside $85 million to tackle the Mycoplasma bovis crisis but this sum is most likely not enough to stop the spread of the cattle disease.

ASB Senior Rural Economist Nathan Penny spoke to The Country's Rowena Duncum about the effect Mycoplasma bovis could have on New Zealand's economy.

"In terms of cost ... the Government has said $85 million up front is the cost and that's likely to rise going forward so hopefully we'll get some firmer numbers on the cost from them and MPI in the next couple of weeks," says Penny.

As for the potential impact on the economy, Penny says there will be costs in managing animal health and cows may produce less milk, resulting in lower farm production levels and an increase in costs. However, as New Zealand is the world's largest dairy exporter, less milk can also result in higher prices which is a positive for farmers.


The New Zealand dollar has dropped against the greenback but Penny says this is more to do with the strengthening of the US dollar rather than the wait for a decision on how to tackle Mycoplasma bovis.

Fonterra releases its first estimate for next season's farmgate milk price and will update the current season price on Thursday. Penny believes there will be a "small the 5 cent, [to] 10 cent range," in the current season payout. However he sees potential for a solid starting point in the following season's forecast - perhaps over $6.50.

Also in today's interview: Nathan Penny looks at lamb prices and the horticulture market.

Listen below: