* Shenzhen quarantine rejects cargo due to MIR 162 discovery-sources
* Drags on global prices, unnerves some Chinese buyers
* But most traders think will be isolated incident withlimited long-term impact
* MIR 162 already exported to Japan, EU, Mexico
By Niu Shuping and Karl Plume
BEIJING/CHICAGO, Nov 19 (Reuters) - China, one of theworld's largest corn importers, has rejected a cargo of thegrain from the United States as it contained a geneticallymodified variety that has not been approved by Beijing, traderssaid.
The discovery of Syngenta AG's Agrisure Vipteracorn in the shipment dragged on global prices and unnerved someChinese buyers as it raised the spectre of other rejections.
But most traders said these were unlikely and that the movewould not have much long-term impact on flows of grain to Chinafrom the U.S. They said the strain, also known as MIR 162, isset to be approved by China soon and is already shipped todestinations such as top corn importer Japan, the European Unionand Mexico.
"It's confirmed. It's one cargo and MIR 162 was theproblem," said one source, who asked not to be identified.
The GMO discovery comes at a time of soaring U.S. cornimports by China as Beijing grapples with record-high domesticcorn prices and rising demand for food.
"It is a minor hiccup in what will otherwise be a smoothimport process. They need our corn, they've got the ordersalready placed. We don't think this is the start of somelong-term major disruption," said Rich Nelson, chief strategistwith Allendale Inc, an Illinois-based research and analyticalfirm.
Even so, the news weighed on Chicago Board of Trade cornfutures, with December corn hitting a three-year low.
Traders in China said the cargo of between 55,000 and 60,000tonnes has already been unloaded at the port of Shekou in thesouthern province of Guangdong. The buyer was a state-ownedtrading house and the shipment may have to be re-loaded fortransport to Japan or South Korea, they said.
The local quarantine authority rejected the shipment afterfinding the unapproved GMO strain in samples, traders said.Shenzhen's quarantine bureau, which refused a U.S. corn cargo in2010 after finding traces of unapproved GMO, declined to makeimmediate comment.
"We think it is an individual case. Not only corn,quarantine authorities have stepped up testing of fishmeal andwheat cargoes," said Li Qiang, chief analyst with influentialprivate consultant firm, Shanghai JC Intelligence Co. Ltd.(JCI).
But a few feed mills were fretting that the move couldpresage a possible shift in government attitude towards curbingimports.
"We are worried. At this stage, we have to wait and seebefore making any judgement whether the government is sending asignal to the market that it does not want more imports orwhether this is simply a quarantine issue," said one tradingmanager with a large animal feed mill in Guangdong.
Chinese feed mills have been aggressively buying U.S. cornsince October to benefit from cheap prices due to a record U.S.harvest.
Domestic prices have typically been more than 20 percenthigher than U.S corn this year as the government raised theprice it pays for corn as part of its stockpiling system tosupport farmers.
China is expected to import a record 7 million tonnes ofcorn in the 2013/14 (Sept/Aug) marketing year, up from 5.23million tonnes the previous year, according to the U.S.Department of Agriculture (USDA).
China is the world's No.3 corn importer after shifting fromcorn exports to net imports in 2010, with nearly all buying fromthe U.S.
"We do not think the rejected cargo has anything to do withthe government looking to curb imports. China's overall strategyis to increase imports and it has to give the right signals tothe world market," said an analyst with an official think-tankin Beijing.
"China's own production is unlikely to grow every year andits current large stocks are only temporary."
Agrisure Viptera, designed to offer enhanced protectionagainst crop-damaging insects, is widely grown in the U.S. sotraces of the grain may have been commingled with approved cornstrains in a shipment to China, traders said.
"Syngenta is not aware of any such incident," said PaulMinehart, head of Corporate Communications-North America forSyngenta Corporation.
China already allows imports of 25 different GMO cornvarieties and is considering adding other commonly cultivatedvarieties to the list, including Agrisure Viptera, which hasbeen pending approval for about 18 months. It is expected to getthe green light later this year or in 2014, according totraders.
A bulk corn shipment from Argentina was cleared for importearlier this year despite it containing traces of MIR 162.
The U.S. historically is the world's top supplier of corn,exporting between 10 and 20 percent of its harvest each year.
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