VOL. 18, NO. 4 / FALL 2023 / URNER BARRY'S REPORTER • 49
As you can see, interest rates within the Eleventh District have experienced an uptick
recently. Feeder Cattle loan rates are used mainly to purchase livestock or feeder cattle.
The interest rate on these loans reached record lows in Q3 2021. Since then, rates
have adjusted upward, mirroring the fed funds rate, which makes obvious sense. In Q2
2022, feeder cattle interest rates reached 9.28%, the highest rate since Q3 2007. These
increased rates would ultimately result in higher costs for ranchers to raise cattle.
Aside from stating the obvious, the tricky part is finding the relationship between these
rates and production. Our findings concluded that cattle slaughter and feeder cattle
interest rates had a moderately strong positive correlation. The moderately strong positive
statistical correlation found that the higher the interest rate, the higher the slaughter figures
and vice-versa. If we were to make any inference from this quick exercise, producers might
be more inclined to liquidate inventories in times of higher interest rates and less inclined
to raise and feed cattle. However, we must recognize that other factors, such as weather,
prices, consumer preferences, and cattle cycles, to name a few, will always be at play.
In similar pieces, we have explained that correlation does not assume causation.
Correlation refers to the statistical linear relationship between two variables.
Additional analysis outside the scope of this article would have to be made to address
causation adequately.
6,500
7,000
7,500
8,000
8,500
9,000
9,500
10,000 5% 7% 9% 11% 13%Cattle Slaughter
Feeder Cattle Rate (t-0)
(Thousand Head)Eleventh District Feeder Cattle Rate vs Cattle Slaughter
Moderately strong positive correlation (no lag)
Figure 3. Eleventh District Feeder Cattle Rate vs Cattle Slaughter, 1995-YTD. Source: Federal
Reserve Bank of Dallas, USDA, UB Consulting
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Continued on page 50
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