Alfalfa remains a foundational input for U.S. dairy and beef production and one of the country’s most economically significant crops. Yet despite ranking as the fourth most valuable field crop in 2024, with an estimated $8.1 billion in farm-gate sales, returns for alfalfa growers have deteriorated sharply.
In a Market Intel analysis, American Farm Bureau Federation (AFBF) economist Daniel Munch details how weather volatility, elevated input costs, shifting global feed demand and limited policy tools have combined to pressure margins across much of the sector.
AFBF noted that, unlike many major crops, alfalfa lacks broad-based risk management options that address sustained margin compression. Prices surged during the drought-driven supply tightening of 2021-22, but as Munch explains, that rally reversed when weather improved and export demand softened. With prices now below full economic cost in many regions—and with alfalfa excluded from the $11 billion Farmer Bridge Assistance Program—AFBF says current losses remain largely unaddressed.
Weather volatility
According to AFBF, alfalfa’s perennial production system heightens market risk by limiting how quickly supply can adjust. Grown in multi-year stands lasting five to seven years or longer, alfalfa is harvested multiple times annually, with more cuttings in irrigated western systems. Munch noted that new seedings respond slowly to higher prices, while growers often remain in production when prices fall, even as margins erode. AFBF reports production is concentrated in major dairy and cattle states, but national alfalfa acreage has declined nearly 40% since 2000 as land shifts toward crops with stronger returns and commodity safety-net support.
Weather remains one of the most persistent challenges for alfalfa producers. From 2020 through 2022, the U.S. experienced one of the most widespread drought periods on record. Munch notes that by early 2023, at least 40% of the contiguous U.S. had been in drought for 119 consecutive weeks, with more than 60% classified as abnormally dry or worse in October 2022.
For alfalfa, drought cuts both yield and quality, while water shortages in irrigated regions can force acres out of production entirely. AFBF points to reduced surface-water deliveries and tighter groundwater regulations in California and Arizona during 2021-22, which helped drive U.S. hay inventories to their lowest level since 1954 and pushed prices higher.
Drought also intensified demand. AFBF surveys cited by Munch show 70% to 80% of affected ranchers removed livestock from rangeland, boosting hay use, while nearly 90% faced higher feed costs. Two-thirds reported herd liquidations, shaping today’s slower cattle-herd recovery.
Export dependence raises risk
AFBF also highlights growing exposure to export volatility, particularly for western producers. Roughly 31% of West Coast alfalfa and other hay production is exported, compared to about 3% nationally, leaving those growers especially sensitive to shifts in global demand.
China has played an outsized role. Munch notes that in 2022, China accounted for 57% of U.S. alfalfa hay exports by volume. That support weakened sharply in 2023, when total U.S. exports fell 23%, driven by a 47% drop in shipments to China. Softer Chinese milk prices, an oversupplied dairy sector and broader economic slowdown reduced feed demand, a trend that continued through 2024 and 2025.
AFBF reports that gains in other markets—including Saudi Arabia, the United Arab Emirates and Japan—have been uneven and insufficient to offset China’s pullback, underscoring the fragility of export-driven support for hay prices.
Costs hold firm
The financial impact of these combined pressures is now evident in returns. AFBF data cited by Munch show national average alfalfa prices falling 43% from April 2023 to November 2024, from about $288 per ton to $164 per ton. In 2025, prices averaged roughly $171 per ton.
At the same time, production costs have remained elevated. Cost-of-production studies referenced by AFBF show full economic costs ranging from $165 to more than $300 per ton, depending on region and irrigation intensity. Input expenses—water, fertilizer, labor, fuel and machinery—have increased 20% to 35% since 2020, while yields have stagnated near 3.5 tons per acre.
Using USDA acreage and yield data, AFBF estimates that 2025 alfalfa production totaled roughly 49.8 million tons. With average prices near $171 per ton, farm-level revenue reached about $8.5 billion. Against estimated full economic production costs of roughly $11.4 billion, Munch calculates an annual economic shortfall of about $2.9 billion, or roughly $203 per acre.
Looking ahead, AFBF warns that without more responsive risk-management tools and policy recognition, prolonged negative margins could accelerate acreage loss. As Munch concludes, sustaining alfalfa production is essential not only for hay growers but for the stability of the broader U.S. livestock sector that depends on it. — Charles Wallace, WLJ contributing editor
