Traditional farm expansion versus joint venture remote partnerships

Ross Kingwell, Quenten Thomas, David Feldman, Imma Farre and Brad Plunkett

Australian Journal of Agricultural and Resource Economics, 2018, vol. 62, issue 01

Abstract: Traditionally, farms expand by buying out a neighbour. But might remote partnerships be a better way of expanding a farm business given projected climate change and price volatility? This question is addressed using farm business financial modelling. Representative farms at 27 locations in Western Australia are constructed to enable comparison of the value of buying out a neighbour versus expansion using geographically distant joint venture (JV) partners. The farm models consider economies of size, bulk purchase price discounts, the variability and correlation of returns associated with farm expansion, and impacts of climate change. Random selection of a remote partner generates little improvement in wealth; on average only 2.3 and 1.6 per cent, respectively, under current and projected future climate across all locations. However, there is large variation in wealth appreciation opportunities for each location and between locations. Preferred partnerships are a function of each farm’s characteristics. Locations highly preferred as JV partners under current climate are similarly preferred partners under projected future climate. The main sources of additional wealth come from economies of size advantages, risk-spreading benefits of combining geographically separated farms and bulk discounts. Farmers seeking business expansion will often benefit greatly from careful selection of a remote partner.

Keywords: Farm; Management (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://ageconsearch.umn.edu/record/313561/files/ajar12229.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ags:aareaj:313561

DOI: 10.22004/ag.econ.313561

Access Statistics for this article

More articles in Australian Journal of Agricultural and Resource Economics from Australian Agricultural and Resource Economics Society Contact information at EDIRC.
Bibliographic data for series maintained by AgEcon Search ().