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As soybean futures plunge, farmer says tariffs have 'devastated' the industry

Key Points
  • The possibility of a record soybean harvest will only add to the woes of an industry already "devastated" by escalating U.S.-China trade tensions, says farmer Chris Gibbs.
  • Soybean futures plunging on Friday after a USDA report about the possibility of a large soybean harvest.
  • Gibbs says the agriculture community's fear with the trade war is that the U.S. will be seen as an unreliable supplier.
The trade war has been devastating for soybean farmers: Farmer

The possibility of a record soybean harvest will only add to the woes of an industry already "devastated" by escalating trade tensions between the United States and China, Ohio soybean farmer Chris Gibbs told CNBC on Friday.

Earlier in the day, the U.S. Department of Agriculture predicted U.S. soybean production for the 2018-19 crop year would hit 4.586 billion bushels, topping market forecasts. The news sent soybean futures plunging on Friday, falling more than 4.5 percent. It was their worst day since the July low.

"The effect of the trade war has been very devastating on soybean farmers here. We've taken a 20 percent drop in price," Gibbs said on "Power Lunch. "

"What we're seeing with market action today only exacerbates the fact that we have lost our No. 1 customer because of the trade wars."

A trailer is filled with soybeans at a farm in Buda, Illinois, July 6, 2018. 
Daniel Acker | Reuters

The U.S. and China have been engaged in a tit-for-tat escalation of tariffs against one another. In July, President Donald Trump slapped 25 percent tariffs on $34 billion of Chinese imports. Beijing responded by imposing 25 percent duties on American exports, including soybeans.

In August, the U.S. Trade Representative's office released a finalized list of $16 billion worth of Chinese goods to be hit with tariffs, to take effect on Aug. 23. China responded by announcing a 25 percent charge on $16 billion worth of U.S. goods.

Trump has also threatened to impose broader tariffs on as much as $500 billion of Chinese goods.

Gibbs, who owns and operates 560 acres of farmland, said the agriculture community's fear is that its years of building up markets around the world could disappear overnight.

He pointed to history as a guide — specifically what happened in 1980, when then-President Jimmy Carter imposed a grain embargo on the Soviet Union after the country invaded Afghanistan. That resulted in other world markets looking for a different supplier since the U.S. was seen as unreliable, Gibbs said.

"This is the fear that we have out here in agriculture country, that we're going to become an unreliable supplier," he said.

— Reuters contributed to this report.