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Interdependence of the Sectors of Economy, Impact of Mycoplasma Bovis and Primary Sector Effect

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Interdependence of the sectors of economy:

An interdependent relationship exists when there is a two-way reliance where two sectors depend on each other. Example being, is that households rely on producers for goods and services along with jobs and occupation’s. E.g increased salary, wages, and interest.

Producers relies on the household sector for income (the payment made from the household for goods and services) know as consumer spending. They also rely on households for workers as firms need workers to produce goods and services, which they sell back to households. Within the household sector there are a lot of people that rely on the producer sector for jobs, clothes, needs and the internet. Therefore, the 2 sectors household and the producer sector are both independent sectors.

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Within the household sector, they rely on the producer sector for goods and services. Which they pay for those goods and services using their income from producers (e.g. food, cloths, other stuff and services). The household sector also relies on the producer sector for jobs and occupations (for e.g. wages, jobs, increased payrates, increased interest). The producer sector relies on the household sector for payment made (consumer spending’s) payment from the households is the producer’s income. The household also gives the producer a better economics of scale. The producer sector relies on the primary sector for recourses (for e.g. beef, lamb, chicken, fish, dairy products) to turn into their own products and sell to their consumers (households) which is producer only income and revenue.

Household and government sector interdependence:

Household relies on government for facilities- such as schools, roads, a police force – as well as transfer payments for those who need them, while the government needs households to pay tax in order to enable the government sector to fund these facilities. This is how their interdependence works

Between the primary and secondary sectors, the primary sector relies on the secondary sector to buy their outputs so that they can be processed into finished goods. The secondary sector relies on the primary sector to supply the raw materials to process.

Between the secondary and tertiary sectors, the secondary sector relies on the tertiary sector to distribute their output to consumers. The tertiary sector relies on the secondary sector to supply finished goods to sell.

Between the primary and tertiary sectors, the primary sector relies on the tertiary sector to distribute and market their output to both the secondary sector and consumers. The tertiary sector relies on the primary sector to use their services and provide a source of revenue.

Impact of Mycoplasma bovis:

Mycoplasma bovis is defined as a bacterial disease, that affects cattle in serious condition. This disease creates a welfare and productivity issues for cattle, fortunately it does not infect or presents any safety risks to humans. M bovis is spread from animal to animal through close contact and bodily fluids, such as mucus, and through milking equipment. Calves can be infected through drinking milk from infected cows. The disease is mostly spread through movement of cattle from farm to farm.

In July 2017 this disease was found in the South Island in New Zealand and has impacted various parts of the NZ cash flow within the economy. In responses to this disease, the New Zealand government have taken precautions in case of an outbreak throughout the whole of New Zealand.

The NZ government have come to the decision to focus on eradicating M.bovis from New Zealand. The government believes that they have an opportunity to eradicate the disease from the whole of New Zealand by undertaking phased eradication. This will be able to ensure future benefits for NZ

The decision made indicates that by continuing to trace down all affected cattle and testing and culling those herds with infected animals in them. This will continue until regular surveillance finds no further evidence of the disease. By phased, they mean that it will take place over several years. They expect to do most of the eradication work in 1-2 years. Which will be done in a cooperation with affected farmers to allow flexibility around timing of culling to offset production losses. But unfortunately, will take 8-10 years until the disease is finally eradicated.

Primary sector effect:

In the primary sector, mycoplasma Bovis has affected our farmers gradually. In short Westpac have mentioned the financial results of the farmers that been identified with Mycoplasma Bovis to be devastating for individual farmers, business and the wider world.

Westpac have stated “While farmers will qualify for compensation under the Biosecurity Act, there are already complaints about how long the compensation process is already taking, as well as uncertainty about just what compensation farmers will be eligible for,” the bank said.

“In addition to this uncertainty, the loss of many years’ worth of improvements in breeding stock and the stress of sourcing new cattle and effectively rebuilding the business from scratch will have a massive impact on affected farmers. Add to this the lingering cloud of uncertainty over the future of cattle on farms currently under restricted places notice, and sentiment in the affected areas is set to remain downcast for some time yet.”

The disease into response to dairy farmers has diminished their main source of income, although the bio-security act has settled for compensation for the farmers loss, they are to wait over several months until that compensation is payed. Leaving dairy-farmers in a difficult financial situation. Mycoplasma bovis has impacted NZ dairy farmers in a bleak way and has affected the lives of these people. To the extent of the farming sector, having to use a farming system that currently relies on moving large numbers of cattle. To prevent the disease from spreading. What we may now see are fewer animal movements and a move towards more closed herds which is what has been seen internationally. This can give farmers greater certainty in their herd health and resilience against biosecurity threats. Leading to the loss of their jobs and assets

Tertiary sector effect:

In the tertiary sector, mycoplasma Bovis seems to be affecting the dairy side of the sector rather than the incomes of large majority farmers. In the past week, Fonterra announced a “strong” opening forecast farmgate milk price of $7 per kg of milk solids for 2018/19. It also forecast its New Zealand 2018/19 milk collections to be 1.5 per cent higher than it forecast previously.

Federated Farmers dairy chairman Chris Lewis expected benefits for farmers from the strong price but said it would be little consolation for farmers caught up in the M bovis outbreak.

“They haven’t, the animals to milk and this is just adding to their frustration of moving away from future profits. It’s very sad and they are taking one for the team,” Lewis said.

Farmers received compensation for lost earnings until a farm was re-stocked, but that could take many months and there were still bills to pay. Which is quite unfortunate, with this being mentioned it is obvious that the tertiary sector will suffer a large loss of productivity, for producers. For example, the people who deliver milk for companies such as Fonterra are affected when it comes to M. bovis. As this disease lessens the milk provided to the producers from the farming sector. This means that with the production of milk being depleted and not keeping up with demand, Fonterra or any other milk company in Nz is forced to make the decision of firing employees as there is no benefit that comes with being over-staffed as that it is a liability to the company and will unfortunately will lead to Fonterra having to find new producers of milk. But when these people do lose their job, they are forced to find another, but it is not as if they’re going to be jobless for the rest of the lives. It’s just that when applying for a job, they might find it a struggle to find one that suits their criteria within New Zealand with the current disease. Which might force them to move somewhere else outside NZ to find a suitable income.

The flow-on effect on other interdependent producers in the Tertiary Producer Sector:

The after effects of mycoplasma Bovis, affects various households and their jobs. Mostly to do with the primary sector, but also affects households in the tertiary sector and secondary sector.

Within the tertiary sector there are mixed number of jobs affected from the disease. For example, one problem that could occur is if the number of farms McDonalds is partnered with, is found to be infected with mycoplasma bovis. This will most likely force McDonalds to break their relationship with that farmer. Leading McDonalds to find another alternative farm to produce beef for their meat patties. As that farm is no longer any use to them as it cannot produce enough beef to cover the demand that they required. With this being a major issue in economic means for McDonalds, which can cause various troubles for the company and the people who work under them. This can cause people who work under the company as transporters or as standard workers to lose their job. Because they are unneeded within the company, this is what we call the flow on effect. When households lose their job such as transporters or farmers, this affects their household’s income as their main source of income has declined. Which also affects other producers/firms as their main source of income is Household spending which relates back to the previous problem the loss of Jobs for households. Even the government is affected in this area, whether it be mycoplasma bovis, or the loss of taxes, that they receive from households it also has a large impact on the economy.

The problem people face as in the tertiary sector and the primary sector in the dairy industry, is that the farms that have been affected with mycoplasma bovis, will result in all the cattle on farms that are in infected. Will have to be eradicated in a short amount of time. Which will likely cause the effect of an increase in meat within Nz. There would most likely be lots of meat to process and sell, likely causing the cost of beef to plummet. Because of this, there is a high possibility that many people would keep their jobs as transporters or Meat works(processors)/Abattoir, but perhaps only for a certain amount of time, because eventually there would be no more or much less meat to process, because there would not be many cows because of the culling. So, people may eventually end up losing their jobs anyway.

Link to cash flow chart:

In this situation mycoplasma bovis, will affect households within in the flow chart will affect the primary sector (farmers) and will also affect producers because they will have less products from the primary sector to make their own products which will affect business and profit to related companies/firm it also has a negative effect on households because they will not be able to purchase the needs they need from the producer. This issue also relates to the jobs that will disappear as there are not that much need for farmers or transporters as their work load will be minimizing every time a farm is found affected with mycoplasma bovis. Making these households that work in the dairy industry lose their source of income, which back tracks to the government, financial, and producer sector.

Starting a chain reaction throughout all sectors of the economy.

Normally the process for the dairy industry somewhat happens like this; The primary sector will raise animals and sell dairy products and beef, which they sell to producers in the secondary sector who turn the products they receive into goods. Which gets processed into their own products and sell it to the consumers (households) through the tertiary sector.

The households are the sector that purchases the producer’s products. Producers selling their products to the households are their main source of income for producers. The main problem arises when the primary sector has difficulty’s producing meat and dairy products, this will indefinitely affect the farmers income, as farmers will have nothing to sell to producers.

The producers will also be affected, because they will have less supplies and resources to produce their own products and sell to their consumers (households). Which may affect their income and cash flow for the business and the workers.

The households will also be impacted by this because in time households will need to purchase a product from producers. Which result in the problem arising that producers will not have enough recourses from the primary sector, to make their products to sell to the household. Which goes to show that they will be unable to purchase the product they need because it won’t be there or for the same product but at an increased price because of its rarity.

On these three sectors there is a negative impact on 3 of these sectors, households, producers and the government sector. The negative outcomes that become transparent will cause households that work in the primary sector as dairy farmers, to lose their cattle because of M.Bovis, that means that with the less milk and supplies being made by the primary sector, producers that mostly deal with the secondary sector in the dairy industry, will have to suffer. As their demand is not being met by the primary sector, but is being under stocked, which can cause productivity issues for the company. Which can result to people being fired as there is no profit or benefits that comes with being over staffed. This also could lead to some products costing more than usual in certain circumstances.

In the government sector they also suffer some negative impacts, that deal with mycoplasma bovis, such as the economic decrease in the economy, as one of their main companies of Nz Fonterra that they rely on to help support the economic dollar for the country is being diminished, as the problem we face in New Zealand solely focuses on Fonterra’s main resource that are used is cows. This also is not the only problem the government faces, there is also the transfer payments that are required for compensation for the farmers that have lost their cattle. There is also the loss of a certain amount of taxes that they will have to suffer soon, as there will most likely be a lot of people losing their jobs because of M.Bovis.

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