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Soybeans being sorted according to their weight and density on a gravity sorter machine at Peterson Farms Seed facility in Fargo, N.D. on Dec. 6, 2017.Dan Koeck/Reuters

The soybeans John Preun grows on his farm north of Winnipeg make their way by truck, train and ship to Mexico, Ontario and Quebec to become livestock feed. Like other Canadian growers, the price his crop fetches is set by buyers and sellers in Chicago.

But lately, heated trade rhetoric in Washington and Beijing is the market’s main driver.

Prices for soybeans on the Chicago Board of Trade have plunged amid threats of a U.S.-China tariff fight.

U.S. tariffs on US$50-billion worth of Chinese imports are slated to kick in on July 6. Beijing said it will hit back on the same day, imposing tariffs on a list of U.S. products, including soybeans.

“We had been getting a pretty good price, but as soon as the trade war started with the Americans and the Chinese the price has dumped,” Mr. Preun said. “It’s a Chicago-based price and we are price takers.”

Even before the tariffs are imposed, prices for soybeans are down by about 15 per cent to US$8.75 a bushel since mid-April, when warnings of tariffs began. Large global harvests have also dampened prices.

“Nobody could anticipate this kind of trade action happening. Politics has played a lot into it and it’s out of our control,” Mr. Preun said in an interview.

China is the biggest buyer of soybeans, purchasing 40 per cent of the Canadian crop and 60 per cent of the world’s. The country’s tariffs are expected to be accompanied by a decline in purchases, especially from the United States.

“They’re going to buy less,” said Jean-Philippe Gervais, an economist at agricultural lender Farm Credit Canada, “so it’s not a surprise to me that we’ve seen a decline in the Chicago price.”

The weaker Canadian currency acts as a buffer for domestic producers who price their goods in U.S. dollars. But the Canadian dollar’s decline of about 5 cents against its U.S. counterpart this year is not enough to make up for the steeper plunge in prices for soybeans. Wheat and corn have also seen sharp price declines since May.

In addition, Canadian growers face rising costs of borrowing and for fuel, Mr. Gervais said.

Farmers who several months ago expected a profit of about $80 an acre from their soybean crop are now hoping to just cover their planting, fertilizing and other costs, he said. “You’re flirting with break-even right now,” Mr. Gervais said by phone.

Canadian growers planted 6.5 million acres of soybeans in 2018, down about 10 per cent from a year earlier but about double the acreage seeded in 2005. As growing seasons lengthen and seed technology improves, soybeans have become the third-largest crop in Canada, after canola and wheat. The main growing provinces are Ontario, Manitoba and Quebec.

Mr. Preun, who also grows wheat, corn, peas, oats and canola on 7,000 acres in St. Andrews, Man., is hopeful Canadian soybeans will hold their value better than U.S. beans when and if the Chinese tariffs are in place.

Mr. Preun has contracted to sell about 40 per cent of his soybean crop, some of which was priced before the recent plunge. He said grain companies are offering about $10.25 a bushel for soybeans, a price that barely accounts for the exchange rate.

But he figures grain companies will have to raise their offers when supplies thin out later in the year and they still have trains to fill. Until then, Mr. Preun said he has enough on-farm storage to wait.

“I think farmers are smart enough to know that once the market is short, grain companies are going to have to pay up. But they won’t do it until they absolutely have to,” he said.

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