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Unanticipated environmental shocks impact the livelihoods of many resource users around the world. These shocks are likely to be more unpredictable as the effects of climate change continue to mount. Yet how households adapt to these changing climatic conditions especially in the context of rapidly changing market conditions in most areas of the world, is poorly understood. These interactions have wide implications for both smallholder livelihoods and sustainable use of natural resources. In this paper, we examine the relationship between environmental shocks and stocking rates in livestock herds in the Inner Mongolian grasslands of northern China. We uniquely examine three types of shocks and how households adapt livestock production strategies in response to each. Separately and in aggregate, we look at three common shocks in Inner Mongolia: droughts, snowstorms, and locust outbreaks. We use a difference-in-differences approach to estimate changes in stocking rates among households that experience shocks versus those that do not with a panel dataset from 2009 to 2014 of 597 households. While we find no clear impact from locusts, our results suggest droughts and snowstorms have opposite effects: droughts are associated with increases in herd sizes, but snowstorms result in decreased herds. We suggest these differences are due to interactions between shocks, emerging options to borrow on credit, and livestock markets. Household adaptation to climate change will be strategic and take advantage of both available resources as well as market conditions. • Climate change is causing stronger and more unpredictable environmental shocks. • We use a difference-in-differences model to estimate the impact of shocks on stocking rate. • Drought relates to bigger herds; snowstorms relate to smaller herds. • Households adapt to shocks taking advantage of both available resources and market conditions. • Shaping well-functioning market may reduce opportunistic resource exploitation. [ABSTRACT FROM AUTHOR]