Good news for alfalfa growers is bad news for dairy producers. High demand for alfalfa hay and a small crop in the United States has resulted in a price hike of more than 50 percent, according to the Merced Sun-Star. In Merced, supreme alfalfa hay is pulling in $275 to $285 a ton.

"Alfalfa hay is a very important part of a lactating cow's diet, because cows need the fiber and the protein from alfalfa," Castillo was quoted.

Milk is in demand around the world, spurring the growth of dairies and creating a market for U.S. alfalfa abroad.

"We are selling a lot of alfalfa hay to Japan and China," Castillo said. "They have dairies there that have California technology."

Drought in some parts of the U.S. means there's less grass for grazing cattle. The grass has to be replaced with hay, putting more demand on the already stretched hay supply.