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Fed Cattle and Fed Policy: The Role of Interest Rates in the U.S. Beef Cattle Cycle

Author

Listed:
  • DeLay, Nathan
  • Brewer, Brady
  • Cowley, Cortney
  • Kreitman, Ty
  • Scott, Francisco

Abstract

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.

Suggested Citation

  • DeLay, Nathan & Brewer, Brady & Cowley, Cortney & Kreitman, Ty & Scott, Francisco, 2026. "Fed Cattle and Fed Policy: The Role of Interest Rates in the U.S. Beef Cattle Cycle," 2026 Annual Meeting, July 26 - 28, 2026, Kansas City, Missouri 404349, Agricultural and Applied Economics Association.
    • Handle: RePEc:ags:aaea26:404349
    DOI: 10.22004/ag.econ.404349
    as

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    References listed on IDEAS

    as
    1. Cortney Cowley & Ty Kreitman & Francisco Scott, 2024. "Not Bullish: U.S. Cattle Herds Hung Up on Higher Interest Expenses," Economic Bulletin, Federal Reserve Bank of Kansas City, pages 1-4, March.
    2. Jeffrey A. Frankel, 2008. "The Effect of Monetary Policy on Real Commodity Prices," NBER Chapters, in: Asset Prices and Monetary Policy, pages 291-333, National Bureau of Economic Research, Inc.
    3. Ralph Bierlen & Bruce Dixon & Bruce Ahrendsen, 2001. "Cattle cycles: is there a role for a financial accelerator?," Applied Economics, Taylor & Francis Journals, vol. 33(5), pages 559-568.
    4. repec:ags:aaeach:376300 is not listed on IDEAS
    5. Paul N. Ellinger & Vishwanath Tirupattur, 2009. "An Overview of the Linkages of the Global Financial Crisis to Production Agriculture," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 91(5), pages 1399-1405.
    6. Stephen F. Hamilton & Terry L. Kastens, 2000. "Does Market Timing Contribute to the Cattle Cycle?," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 82(1), pages 82-96.
    7. Jorge Alberto Miranda Pinto & Mr. Andrea Pescatori & Ervin Prifti & Guillermo Verduzco-Bustos, 2023. "Monetary Policy Transmission through Commodity Prices," IMF Working Papers 2023/215, International Monetary Fund.
    8. David L. Neff & Paul N. Ellinger, 1996. "Participants in Rural Bank Consolidations," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 78(3), pages 721-727.
    9. Giri, Anil K. & Subedi, Dipak, 2025. "Labor and Interest Expenses of American Farms and Ranches," Choices: The Magazine of Food, Farm, and Resource Issues, Agricultural and Applied Economics Association, vol. 40(4).
    Full references (including those not matched with items on IDEAS)

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