By Karl Plume
CHICAGO, Dec 3 (Reuters) - Nearly 2 million tonnes of U.S.corn heading to China face stringent testing for an unapprovedgenetically modified (GMO) variety after several cargoes weredenied entry by state quarantine authorities, taking exportersand grain traders by surprise.
Since mid-November, China, the third biggest customer ofU.S. corn, has turned away several cargoes and containers ofcorn that tested positive for Syngenta AG's AgrisureViptera as it has not been approved for import by China.
U.S. exporters had hoped Chinese officials would look theother way as the corn variety, also known as MIR 162, has beenin the U.S. supply chain since 2011 and no cargoes had beenrejected for containing the trait until this year, trade sourcessaid.
MIR 162 has not been segregated from other corn varietiesbecause approval by China appeared imminent and all other majorbuyers have approved its import, including Japan, South Korea,Russia and even the European Union, which is notoriously slow inapproving GMO crop varieties. Approval by China has been pendingfor more than two years.
"A lot of us in the trade knew that the Chinese had notmoved this approval along with the hope that they would look theother way," said Dan Basse, president of AgResource Co.
But when a shipment was flagged last month for containingMIR 162, China Inspection & Quarantine Services officialsappeared to scrutinize incoming cargoes more closely for theunapproved strain, Basse said.
In addition to the nearly 2 million tonnes on boats headedto the mainland, China has another 3 million tonnes purchasedthat they have yet to ship.
More than 500,000 tonnes were inspected for export to Chinajust last week, according to the U.S. Department of Agriculture.
COMMINGLED CORN SUPPLY
Crop experts estimate that up to 10 percent of the14-billion-bushel U.S. corn crop carries the MIR 162 trait,designed to offer enhanced protection against crop-damaginginsects. Since it is commingled with other varieties in the U.S.supply chain, traces of the variety could likely be found inalmost every shipment, exporters said.
"With general U.S. commodity corn it should be assumed thateverything that's approved commercially could be in there," saidNathan Fields, director of biotechnology and economic analysiswith the National Corn Growers Association.
"Why the Chinese would choose to make an issue of it iseither that they haven't found it before, they've looked away,or they've decided that it's time to start enforcing this."
U.S. exporters can test for unapproved GMO strains beforeloading a vessel if there is concern that a cargo may berejected by the receiving country, trade sources said. But sinceU.S. supplies have been flowing smoothly into China for years,concerns about MIR 162 were minimal, they said.
AWAITING CHINESE APPROVAL
Agrisure Viptera was approved for cultivation in the UnitedStates, the world's top corn producer and exporter, in 2010.Canada, Brazil and Argentina also allow cultivation and 11countries as well as the European Union have approved imports.
China was originally expected to approve MIR 162 imports inMarch 2012, said Syngenta spokesman Paul Minehart. The companyhas answered all Chinese requests for information and is nowwaiting for Beijing to act, he added.
"The solution is with the Chinese authorities. If they wantto import corn from the major corn producing areas of the worldthey should synchronize their regulatory process so that theycan accept the corn being grown in those regions," Minehartsaid.
The discovery of a genetically modified wheat strain inOregon this past summer disrupted white wheat exports to Asiancustomers until the USDA confirmed it was an unusual occurrence.
The biggest disruption to U.S. exports linked to GMO cropsoccurred in 2000 with the surprise discovery of a corn straincalled Starlink - unapproved for use in Japan had been found ina U.S. corn cargo there - roiled U.S. corn shipments for months,costing millions in inspections, tests and cancellations.
Grain traders did not expect Agrisure Viptera to rile themarketplace as much as those events, but some disruption wasexpected.
Exporters may be reluctant to load ships to China amiduncertainty that they could be turned away. Rejected cargoescould be resold to other buyers, possibly at a steep discount.Other buyers may delay making new purchases if they believe theycan secure a cheaper, rejected cargo.
"I wouldn't be extending my book if I was one of the otherAsian buyers. And if I was an exporter, I might not be tooanxious to load vessels bound for China right now," said ShawnMcCambridge, analyst with Jefferies Bache.
"This is going to stall things for a while."
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