Despite constant doom-saying over climate and commentators wringing their hands over floods in Queensland and droughts in NSW and Victoria, Australian farmers have boosted production by 50 per cent in nearly 30 years.

But that success, like much else in the Australian economy, is partially due to the rise of China which is now running into problems of its own – an immense pile of debt.

A graph in the Agriculturel overview: March quarter 2019 compiled by the Australian Bureau of Agriculture and Resources Economics and Sciences, the research arm of the Federal Department of Agriculture and Water Resources, shows that even with the droughts and floods, production in 2019-20 is expected to be 50 per cent more than 1991-92 in real terms. Compiled using statistical techniques that aggregate different types of commodities and eliminate price effects, the graph shows that even the major droughts in 2003-04 and 2007-08, the so called millenial drought in the South- East, had no permanent effect. Australian farmers shrugged off those setbacks to boost output in following years, just as they are expected to cast off the current troubles.

Thanks to that adaptation, production of less than $40 billion in 1991-92 (adjusted – the bureau uses a dollar value to measure output), has now grown to a forecast $58 billion in 2019-20. Drought and flooding in the eastern states will be offset by very good to average harvests in Western Australia.

This production success has been achieved despite, or perhaps because of, successive Australian governments from the mid-1980s dismantling government protection and regulation of agriculture so extensive that it was dubbed agri-socialism. Now a bar chart of agricultural assistance in different countries produced by the Department of Foreign Affairs and Trade records Australian subsidies/protection to farmers as a dot besides the huge bars representing estimates of assistance given to farmers in China, the European Union, India, the US and Japan.

However, the overall production increase still only adds up to an average productivity improvement of just 1.5 per cent a year, which is the long-term increase in the sector, and is less surprising when compared with an international food prices index compiled by the UN Food and Agricultural Organisation. That shows that since the turn of the century food prices have undergone a major re-rating. Despite falling from a  big peak in 2010, real prices are still perhaps 40 per cent higher than in 2000. Dairy products are the big winners in that increase, with unadjusted prices nearly doubling.

Academics still argue over why prices have re-rated but it is thought to be due to economic changes in China and India lifting many millions of people out of poverty, meaning that they have more money to spend on food. Australia’s largest agricultural export category is meat of various kinds, mostly beef, a mainstay of middle-class diets.

The real problem for Australian agriculture emerges when we take a closer look at who is buying this vast increase in output. As with the major increases in coal, iron ore and base metals that have occurred in the past decade, DFAT figures show that China is by far the largest customer for agricultural products. The country buys about 21 per cent of exports or nearly double the proportion bought by out next-largest customer, Japan.

China’s vast appetite for Australian iron ore and coal is even more marked in the overall figures which show that in 2017-18 it imported more than $106 billion worth of goods from us, or a third of all our exports. It surpassed Japan as our major export customer in 2009. The largest category of export to China, by a large margin, remains iron ore but agricultural products still make a healthy contribution.

Will China continue to import minerals and food at a pace that has greatly boosted Australian incomes or will it, as many obervers believe is possible, succumb to a major debt crisis? For much of China’s expansion has been fuelled by debt. A McKinsey and Co. report released in March states that China’s debt-to-GDP ratio has soared from 120 per cent in 2007 to 253 per cent in 2018.

The true debt figure may be higher but the official figure is still larger than the ratios in Germany and the United States, which are both far more developed countries. Also, China’s regional party chief-run economy is notorious for vastly overbuilding capacity, including whole cities with no people, steel smelters without customers and major conference centres without conferences seemingly in every province. A report by green group Global Energy Monitor released in March notes that satellite photographs show that developers have quietly restarted work on dozens of new coal plants, far more than the country would have any use for in the next few years.

All that said, a Bloomberg commentary in January points out that China observers have been holding their breath expecting something to happen since 2007. Now commentators believe that rather than let the pile of debt and the bad decisions fuelled by that debt be washed out of the economy in one very painful recession, as would happen in the West, China will take the same route as Japan and try to repress the problem. For this the country has access to many more levers than its Western counterparts, including restrictions on capital outflows, and the ability to direct that more credit be issued.

The danger then is not that China will collapse, but that – as has happened in Japan – the economy will stagnate. One estimate is that up to 24 per cent of all loans are non-performing, which is very serious but still less than the estimated one third of all loans reached in some countries during the 1997 Asian financial crisis.

If and when financial reality catches up with China they will show markedly less enthusiasm for buying Australian baby formula and beef, potentially affecting agricultural output, regardless of any supposed effect from changes in climate.