This study examines the role of interest rates and monetary policy in shaping short-run supply dynamics in the U.S. fed cattle sector. Using quarterly data on agricultural loan rates, feedlot inventories, cattle placements, and marketings across major cattle-producing states, we estimate the relationship between financing costs and cattle inventories. Initial fixed-effects results indicate that higher agricultural interest rates are associated with significantly lower cattle placements, with a one percentage-point increase in loan rates reducing placements by approximately 2.5–2.9%. Evidence on cattle-on-feed inventories and marketings is weaker but suggests dynamic responses over time. Because observed loan rates may be endogenous to local market conditions, we outline an instrumental variables approach that uses exogenous monetary policy surprises used elsewhere in the monetary economics literature. This paper highlights the importance of financing costs as a determinant of cattle supply.
