* Reform push meets opposition within govt, farm lobby
* Current law allows seeds to be reused for free
* Advocates of overhaul say would spur food production
By Maximilian Heath
BUENOS AIRES, Dec 21 (Reuters) - A drive to overhaul Argentina's seed regulations to boost food output is meeting fierce resistance from within government ranks and from farmers opposed to paying royalties when they reuse seeds gathered at harvest time.
Eager to take advantage of strong global demand for the country's multi-billion-dollar grains exports, Argentina's government has led a push to replace current regulations that do not oblige farmers to pay royalties to seed companies.
The seed industry and large-scale grains farmers say Argentina - the world's third-biggest soy exporter and the No. 2 corn supplier - risks falling behind competitors such as Brazil because the regulatory framework discourages companies from introducing advanced new seeds.
"The current legislation doesn't foster investment in development or the distribution of new technologies because there isn't sufficient protection for intellectual property," said Alfredo Paseyro of the ASA seed industry association.
After a series of meetings earlier this year, government officials and industry leaders agreed a draft bill that proposed royalty payments by the country's biggest grains producers and exemptions for the smallest-scale growers.
However, opposition to the bill from sectors within the center-left government and among some farm groups has prevented it from reaching Congress this year and raised doubts about its chances of ever becoming law.
"The seed law isn't on the government's agenda," Emilio Persico, the left-wing government official who represents peasant farmers at the Agriculture Ministry, was quoted as telling La Nacion newspaper last month.
Persico could not be reached to comment, but an Agriculture Ministry source who asked not to be identified said discussions on the reform would be resumed next year.
"ESSENCE OF AGRICULTURE"
Passing a law that forced growers to pay royalties to seed producers would mark a break with past policy by Argentina's government, which backed farmers during an almost decade-long dispute with U.S. biotech giant Monsanto over royalties.
The payment of royalties for new seed technology is well-established in neighboring Brazil and industry analysts say that has encouraged seed companies to introduce a wider variety of genetically modified crop strains.
In Paraguay, farmers pay $4 per tonne of soybeans produced to use Monsanto's Roundup Ready variety. An association of soy farmers has started lobbying for the royalty to be scrapped, emboldened by an October court ruling in Brazil that ordered Monsanto to stop charging royalties on Roundup Ready.
Argentina's farmers, who have a tense relationship with the administration of President Cristina Fernandez, are divided over the seed industry reform.
Small- and medium-scale farmers belonging to the Argentine Agrarian Federation (FAA) refused to take part in the government's consultative meetings.
"The right to use your own seeds is the very essence of agriculture," said Juan Carlos Herrero, coordination secretary at the FAA. "If I sow a seed, why shouldn't I be able to use it afterwards? This is an issue of sovereignty."
Meanwhile, the Argentine Rural Society (SRA), which tends to represent the biggest grains producers and ranchers, accepts royalties but says payments should not be made every time a seed is reused.
"We agree that technology has to be paid for," said SRA president Luis Etchevehere, suggesting royalties should be due once every five years.