Though the bacteria poses no threats to food safety, it does cause production losses, as infected cows tend to develop mastitis, severe pneumonia, arthritis and respiratory issues.
The recently cropped-up bacteria strain has been found on 38 New Zealand farms thus far and, according to officials, is expected to spread.
"The decision to eradicate the disease is driven by the government's desire to protect national livestock from the disease and protect the basis of the economy, the livestock sector", said Jacinda Ardern.
The disease, which is common in many countries, was first detected in New Zealand at a farm in the South Island last July and some 37 properties have now tested positive for the illness.
In Ashburton, some farmers are anxious that eradicating Mycoplasma bovis will disproportionately hurt their herds through culling.
Many healthy cows will also be killed.
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"No one ever wants to see mass culls". She said they would try to make sure affected farmers had all the support they needed, including adequate compensation. They support farmers with information and advice on the practical aspects of the controls. Some of the slaughtered cattle may be used for beef, but others will be buried on farms or in landfill.
The government will meet 68% of the cost, while farmers and the cattle industry will pay the rest, the New Zealand Herald reports.
Government and farming sector leaders have agreed to cull 126,000 cows and spend more than NZ$800m ($560m) over 10 years in an attempt to save the national dairy herd and protect the long-term productivity of the farming sector, which is New Zealand's second biggest export earner. The dairy herd of the country reportedly has around 6.6 million cows.
If all goes as hoped with the slaughter, New Zealand would be the first country to have registered an infection and successfully remove Mycoplasma bovis from its herds.
Officials say they should know by the end of the year whether the eradication plan is working.