UPDATE 2-Bayer settles U.S. rice contamination case

* Many more cases still pending

* Thousands of farmers say damaged by rice contamination
(Adds Bayer comment)

By Carey Gillam

KANSAS CITY, Mo., Oct 19 (Reuters) - Germany's Bayer AG
(BAYGn.DE) has agreed to settle a lawsuit brought by a group of
Texas rice growers over claims the company's experimental
biotech rice contaminated the U.S. supply four years ago and
decimated exports.

Bayer said it had agreed to pay $290,000 to settle the
case, involving eight plaintiffs from three farming
operations.

The company still faces thousands of claims, and a lawyer
for some rice farmers said the settlement marked a key victory
as it was the first time Bayer had agreed out of court to pay
rice farmers damages arising from the contamination.

"After all these years, Bayer appears to be starting to
take responsibility," plaintiffs' attorney Adam Levitt said in
a statement.

Bayer said it continued to participate in mediation talks
with other plaintiffs in ongoing litigation.

"Bayer CropScience has always been willing to settle such
biotech rice litigation cases on reasonable terms and is
pleased to be able to do so in this instance," said Bill
Buckner, president and CEO of Bayer unit Bayer CropScience LP.

In February, a jury ordered Bayer to pay $1.5 million in
damages to three farmers for losses due to contamination
by Bayer's genetically modified rice. The company was ordered
to pay $2 million in a related case last December.

The chemical and drug maker has been struggling to defend
itself against claims from farmers across the United States
after genetically altered rice developed by a subsidiary for
research showed up in the food supply chain in August 2006.

The rice variety had not been approved for commercial
cultivation and its presence in the U.S. crop led Japan and the
European Union to restrict U.S. rice from crossing their
borders, triggered a plunge in rice prices.

The long-grain rice in question had a protein known as
Liberty Link, which allows the crop to withstand applications
of a certain weed killer.

More than 7,000 long-grain rice producers in Missouri,
Arkansas, Louisiana, Mississippi and Texas claimed they
suffered damage.

The United States is a small rice grower but has been one
of the world's largest exporters, sending half its crop to
foreign buyers.

The U.S. Department of Agriculture and the Food and Drug
Administration said there was no public health or environmental
risk associated with the genetically engineered rice and the
two agencies chose not to punish Bayer for the contamination.
(Editing by Lisa Shumaker and Dale Hudson)