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required to pay for the raw milk twice per month;2 the dairies
were required to ship milk to Knudsen on a daily basis.
On July 14 and again on July 31, 1986, Knudsen failed to pay
the milk producers about $30 million for raw milk delivered to
Knudsen between June 16 and July 15, 1986. On July 15, Knudsen
began to make daily payments for milk delivered the previous day.
However, no payments were made on the $30 million back debt.
When Knudsen defaulted, petitioners could not simply stop
producing milk. Cows had to be milked and fed. Farmhands had to
be paid. Grain had to be purchased. The farmers were operating
on very slim profit margins. They faced the possibility of
slaughtering their herds or pouring the milk onto the ground.
For years (in some cases for more than one generation) they had
relied on the regularity of the milk payments. Unexpectedly,
they were faced with borrowing money, depleting their savings,
and possible bankruptcy.
The uncertainty of their situation produced enormous stress,
which did not end on July 15, 1986. The financial problems
caused by losing payment for 4 weeks' worth of milk persisted,
because the loss was not repaid. Even when Knudsen began making
daily payments, there was no guarantee that the money would be
2 According to the stipulation, the contract required
payment on the 13th and 28th days of each month. However,
petitioners testified that they received payment on the 15th and
either the last day of the month or 1st day of the succeeding
month. The discrepancy is not material.
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