* Checks for unapproved GMO variety to continue into 2014-sources
* Cheap imports hurting China's ability to support prices for farmers
* Traders looking to redirect shipments away from China
By David Stanway and Dominique Patton
BEIJING, Dec 13 (Reuters) - China's strict checks for an unapproved strain of GMO corn in cargoes from the United States are likely to continue until early next year as Beijing seeks to curb cheap imports and support domestic corn prices, industry sources said on Friday.
China has rejected only a small number of cargoes of U.S. corn but that has been enough to disrupt the flow of imports from the world's largest exporter. Traders, concerned that their cargoes will be rejected, are already scrambling to redirect shipments to countries that will not turn them away.
China has rejected 4 bulk cargoes and some containers from the United States in the past five weeks and local quarantine authorities are stepping up testing for MIR 162, a genetically modified strain of corn developed by Syngenta AG.
"The reason (for the rejection) is pretty simple. China has had such a large crop and the government is stockpiling in the northeast to try to support domestic prices," said an industry source, who declined to be identified due to the sensitivity of the issue.
China stockpiles a wide range of agricultural commodities from cotton to grains to help support market prices and ensure returns for farmers.
Two industry sources said grain officials at a meeting in November urged authorities to "take measures" to counter imports being driven by U.S. prices that are 20 percent cheaper than domestic prices .
A record U.S. corn harvest this year has pushed the Chicago Board of Trade price to a three-year low, triggering strong purchases by Chinese buyers in October.
But China's corn output is also set to hit a record in 2013/14 at 217.7 million tonnes, beating expectations and surpassing estimated consumption of 197 million tonnes, the China National Grain and Oils Information Centre (CNGOIC) said.
Some analysts expect Beijing to stockpile more than 40 million tonnes of corn from this year's harvest, on top of 30 million tonnes stockpiled last year that could not be sold.
China, the world's second-largest corn consumer, does not publish the size of its corn stockpiles, which include strategic reserves, but 70 million tonnes is more than the European Union uses in a year.
Beijing last month said it would offer subsidies to domestic companies that buy corn from the country's northeast to help ease tight state storage capacity.
The four rejected cargoes totalled about 250,000 tonnes of corn, although some nine cargoes have cleared inspections since November. More U.S. cargoes are due next week and testing has now widened to U.S. shipments of dried distillers' grains (DDGs), an ethanol by-product used by mills a corn substitute for animal feed.
"China is likely trying to use this as a trade barrier. The timing (of the cargo rejections) came just after a series of policies to encourage consumption of local corn," said a third industry source.
"The state reserves say they have large corn stocks that they want to sell, but right now such sales would have to compete with a significant corn import programme."
Already, some corn shipments bound for China are being redirected to other Asian countries, including Japan and Taiwan, traders told Reuters.
"Cargo from ships still at sea is being offered for resale before it has reached China. There are negotiations but I have not heard of any deals yet," said a European trader.
Switching the rejected corn to alternative buyers, sometimes at a discount, has also led to a fall in the number of international feed grain purchase tenders from big Asian importers, such as Korea and Taiwan, traders said
TARGETTING AGRISURE VIPTERA
Up to 10 percent of the U.S. corn crop carries the MIR 162 trait, commonly known as Agrisure Viptera. The GMO strain is designed to offer enhanced protection against crop-damaging insects and is approved in many countries worldwide.
The strain has been in the U.S. supply chain since 2011, when China began to import U.S. corn for the first time in more than a decade. China in August gave the green light to an Argentinian cargo with the strain.
Since it is commingled with other varieties in the U.S. supply chain, traces of the variety could likely be found in almost every shipment, U.S. exporters said.
Chinese quarantine officials told Reuters cargoes would be rejected as long as they were found with the GMO strain.
China has approved 15 varieties of genetically-modified corn for imports and MIR 162 is awiting approval.
"Given the situation, we don't expect the government to approve the strain soon. Any approval would be after the Spring Festival," said the first source, referring to the Lunar New Year holiday which runs into early February.
Analysts said the market wanted the dispute resolved, but feared it could take some time to settle.
"(China) had record production, so time is on their side. We have vessels in the water, and they don't need them. They can drag their feet on this whole approval process, if they want to," said Shawn McCambridge, an analyst with Jefferies Bache.
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