RPT-UPDATE 2-CME backs off on setting vomitoxin limits in corn

(Repeats, fixes typo in headline)

* CME will not set vomitoxin limits in CBOT corn

* CME decision based on customer feedback

* Decision follows ADM shrugging off vomitoxin (Recasts, adds comments from analysts)

By K.T. Arasu

CHICAGO, Nov 24 (Reuters) - The CME Group (CME.O), the world's largest derivatives exchange, on Tuesday reversed its decision to limit the amount of vomitoxin, a fungal offshoot that can sicken livestock, in corn delivered to its customers.

The decision to forgo setting limits comes days before the December corn contract CZ9 at the Chicago Board of Trade, which is owned by the CME, goes into delivery mode. Some buyers of futures will take delivery of corn next week.

"Based on consultations with our customers and further studies on vomitoxin, no action will be taken regarding CBOT corn contracts," CME spokeswoman Mary Haffenberg told Reuters.

She declined further comment. The CME reversal follows remarks by U.S. food processor and ethanol producer Archer Daniels Midland Co (ADM.N) last week that while there were isolated cases of vomitoxin, it was "not a big deal."

CME does not have rules on the permissible amount of vomitoxin in corn because it is a rare occurrence -- unlike in wheat, for which the exchange has limits. [ID:nN17224399].

The grain trade had been abuzz over whether the CME would set limits on vomitoxin in deliverable corn, and if any new rule would affect the December corn contract CZ9 -- the first contract to fully reflect prices for this year's crop.

There have been anecdotal accounts of vomitoxin in the eastern U.S. Corn Belt this year due to wet weather that had delayed the harvest so significantly that some in the business have dubbed it "the harvest from hell." [ID:nN13150416]

'TAKING THE SAFER ROUTE'

Grains analyst Rich Feltes of MF Global said the CME had the "commercial backing from the ADM statement that it was not a major problem."

"They are taking the safer route on this thing, rather than advertise to the world that corn in delivery positions should have 3-4-5 ppm (parts per million) of vomitoxin," he said.

CBOT corn, soybean and wheat futures prices are considered the global benchmark because the CBOT is the world's largest grain exchange and the United States is the top global producer and exporter of all three commodities.

The U.S. food and Drug Administration allows vomitoxin concentrations of no more than 5 parts per million in feed for swine, and 10 ppm for cattle and poultry feed.

"I don't see it as a big issue," said grains analyst Joe Victor of Allendale Inc, referring to vomitoxin.

"Ethanol companies have been looking at it more intently, so if there is any concern it would come from them," he said.

Corn distilled into ethanol produces a byproduct called distillers' dried grain, which is used as a livestock feed.

Poet LLC, the largest producer of ethanol in the United States, said last week the company was testing corn supplies it purchases for all toxins, including vomitoxin.

The company said it had seen vomitoxin in "limited areas near some of POET's plants" in the eastern Corn Belt.

(Additional reporting by Karl Plume and Julie Ingwersen; Editing by David Gregorio)

((ktarasu@thomsonreuters.com; + 1 312 408 8749; Reuters Messaging kumarasamy.thennarasu.reuters.com@reuters.net))

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