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Why the Bega Cheese share price surged higher today

The Bega Cheese Ltd (ASX: BGA) share price was a strong performer on Thursday.

The diversified food company’s shares finished the day 4% higher at $4.22.

Why did the Bega Cheese share price surge higher?

As well as benefiting from improved investor sentiment following the easing of tensions in the Middle East, investors were buying Bega Cheese’s shares after a positive announcement in the afternoon.

That announcement revealed that there has been minimal direct impact to the company, its milk supply, and its ongoing operations from the devastating bushfires which are sweeping through Australia.

According to the release, the company’s two factories in Bega recommenced production this week, with the majority of employees returning to work.

The company’s acting chairman, Max Roberts, also revealed that it has been working closely with farmers and helping where it can.

He said: “We have been working closely with our farmers providing and connecting generators to enable daily milking and also supplying feed for cattle.”

Minimal milk supply impact.

The chairman revealed that the estimated total volume of milk unable to be collected is expected to reach 900,000 litres. This is out of an overall annual milk intake across the company of ~one billion litres.

And whilst two suppliers have decided to dry their herds off earlier than planned because of the fires, potentially reducing milk supply by up to a further one million litres, these milk losses will have no material overall impact on Bega’s operations.

In addition to this, the chairman revealed that bushfires have affected farm operations and infrastructure including the destruction of fencing and power lines, burnt out paddocks, and restricted road access. However, very fortunately, no dairy sheds have been lost.

Also releasing bushfire updates today were Elders Ltd (ASX: ELD) and Suncorp Group Ltd (ASX: SUN). You can read about Suncorp’s update here.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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