Expanding a broadacre farm business is known to be risky. The usual way a farm business expands is by buying out a neighbour using money borrowed from a bank. The farmer then hopes for sufficiently favourable seasons and prices to pay off the loan.  But in a changing climate, farmers may need to consider other options in order to expand more safely.

In Australian broadacre farming greater climatic adversity is projected for some regions. Hence, rather than continuing to buy neighbouring farms, in those regions it may be less risky to expand the farm business elsewhere. Business models, such as joint ventures with farmers in different locations, may offer less risk for expansion.

The effect of expansion by combining farms of similar business risk was shown to have a large positive influence on the value of expansion, which challenges the conventional view from portfolio theory, that combining assets with different riskiness can reduce overall variability.  As long as the land market efficiently prices seasonal risk, then the increased price of lower risk acquisitions already fully incorporates the gains from locational combinations that offer less variance of returns.

The conclusion is that, although there are opportunities for farm expansion that are less risky, identifying those opportunities is not a simple task. There are a range of influences that in combination can greatly affect the riskiness of farm expansion. However, understanding those influences in many situations can allow farm expansion to occur that is  less risky than traditional approaches.