This paper examines the factors affecting the livestock inventory based on the panel data from 12 prefectures (or cities) in Inner Mongolia from 1980 to 2010. Specially, attempt to understand the dynamic changing of the inventory. Based on the livestock products market, an inventory equation is conducted to combine an equilibrium displacement model (EDM) and the livestock inventory. The result is that Inner Mongolia is a large open economy in the cattle market but a small economy in the sheep and goats markets. The livestock inventory is affected by prices of the livestock products and weather conditions significantly when prices are exogenous. Since prices are affected by market shifters, the livestock inventory is affected by the population and transportation in China besides the weather conditions after endogenizing the prices. Our results suggest that it is more reasonable and efficient to implement policies to adjust the livestock market in order to control the livestock inventory than to implement policies directly on the grassland or the farm level. In addition livestock is an environment-sensitive industry so it is necessary to improve the environment in order to ensure its development.