Ample supply, soft demand

Across the West, hay supplies remain ample and demand has struggled to gain traction. Hay trade remained slow through December, reflecting both the holiday period and broader demand weakness. Softer milk prices have significantly weighed on dairy profitability. Demand for hay has been further pressured by unseasonably warm winter weather. Mild conditions have extended grazing opportunities and reduced the urgency to purchase supplemental forages, contributing to stagnant trading activity despite abundant hay availability.

In Arizona and California’s Imperial Valley, haying conditions have been challenging this winter due to persistent wet weather and a series of storm systems moving through the region. Some producers were able to get hay baled ahead of major storms, though scattered fields experienced quality impacts from excess moisture. Wet field conditions have also limited access in some areas, slowing harvest and movement. Livestock range conditions in general are very good, further limiting hay demand next summer. Despite these challenges, retail hay prices across the Imperial Valley have remained generally steady with modest volumes traded. Extended periods of forage availability and cautious buying behavior continue to limit demand, keeping transactions selective and price movement muted.

Export markets remain a significant source of pressure across the U.S. Year-to-date hay shipments for 2025 are down 18.9% compared to 2024, with exports to four of the five major international buyers declining more than 9%. Many exporters continue to hold sizable alfalfa inventories, reflecting several years of slower export movement.

The pullback in Chinese demand has been particularly difficult for West Coast exporters. Over the past decade, substantial export press capacity was built to serve China’s growing dairy industry. Demand has since contracted sharply, with hay exports to China down roughly 20% in 2025 compared to 2024. The decline reflects not only reductions in China’s dairy herd, but also broader economic challenges across several Asian importing countries. These factors were compounded by elevated U.S. hay prices following the severe droughts of 2021 and 2022, as well as a strong U.S. dollar that made American hay less competitive. During this period, exporters were forced to navigate heightened price volatility and currency risk, further eroding margins.  

For producers, market conditions remain challenging. Hay prices have been under pressure for roughly three consecutive years—longer than in previous downturns. If export demand remains subdued, producers could face another difficult season in 2026. The outlook for hay acres is cloudy. On one hand, the prospects for increased hay demand are limited. On the other hand, there are few, if any, profitable alternative crops. Additional acreage shifting into hay would risk prolonging oversupply and delaying meaningful price recovery.

Profitability

Hay (alfalfa): Breakeven profitability - Neutral 12-month outlook
Hay (timothy): Slightly profitable - Neutral 12-month outlook

Profitability is expected to stay under pressure as sluggish demand, weak prices, and cheaper alternative feed options weigh on alfalfa growers.

Timothy hay demand has improved recently, particularly in premium export segments, providing some price stability.