U.S. seeks source of errant gene altered wheat as importers flee

WASHINGTON/SEOUL The United States is still racing to determine how unapproved genetically modified wheat was found growing in an Oregon field, a discovery that continued to roil global wheat markets on Friday as South Korean buyers stepped aside.

A top official with the U.S. Department of Agriculture said investigators are "pursuing many avenues" to determine how the wheat - which carries a gene making it resistant to herbicide applications - popped up in late April.

"At this point we have not ... eliminated any" potential causes, Bernadette Juarez, deputy director of the investigative unit with USDA's Animal and Plant Health Inspection Service, told Reuters in a telephone interview.

South Korean millers suspended imports of U.S. wheat on Friday and some Asian countries increased inspections after the discovery of the unapproved wheat, but stopped short of imposing import bans.

U.S. officials are attempting to tamp down global alarm about the wheat, developed by biotech giant Monsanto Co (MON.N) more than a decade ago but never put into commercial production. Field tests on GMO wheat were last conducted in 2005.

The discovery of the long-forgotten strain prompted major buyer Japan to shun wheat from the Pacific Northwest at its weekly tender on Thursday, while the European Union said it would step up testing.

So far, rival exporter Canada has not seen any benefit from the incident, a major Canadian merchant said, predicting that the nervous response from buyers might soon fade.

"It's like the lights going out in the restaurant I was in last night. Nobody really expects they'll stay out for very long," Curt Vossen, chief executive of Richardson International Ltd told Reuters. "It might be five minutes, but they'll come on again fairly quickly."

In that vein, wheat futures prices in Chicago were higher on Friday, more than retracing Thursday's small decline.

The impact of the GMO wheat find has been felt mostly on cash prices in the Pacific Northwest, a key market for Asian buyers to purchase supplies of white wheat.

Still, South Korea - which last year sourced roughly half of its total wheat imports of 5 million tonnes from the U.S. - has also raised quarantine measures on U.S. wheat bought to feed livestock, while Thailand put ports on alert.

Its scientists had conducted weeks of quiet field work and complex tests before the bombshell news was announced this week.

To pin down the origin of the wheat, USDA extracted DNA from the tissue of wheat plants collected by its investigators from the Oregon field, and sent material to three facilities.

The U.S. Department of Agriculture has said the wheat posed no threat to human health.

South Korean officials said the U.S. had provided the DNA sequence of the rogue GM strain to help its inspectors detect if it was in other imported U.S. wheat and flour. Test results will be released on Monday, the South Korean food ministry said.

"From this weekend, we will also collect wheat and flour imported from all over the United States and will conduct tests next week," said Ahn Man-ho, a spokesman at the Ministry of Food and Drug Safety.

South Koreans say they will not import U.S. wheat until all tests are completed.

TIGHT AUSSIE SUPPLY

Asia imports more than 40 million tonnes of wheat annually, almost a third of the global trade of 140-150 million tonnes. The bulk of the region's supplies come from the U.S., the world's biggest exporter, and Australia, the No. 2 supplier.

But Australia will struggle to soak up extra demand as its supplies tighten in the wake of unsustainably brisk exports and growing demand from domestic livestock farmers.

"The bulk of grain suppliers (in Australia) are cancelling shipping slots and selling grain to domestic feed mills and feedlots," said Stefan Meyer, a manager for cash markets at brokerage INTL FCStone in Sydney.

Japan is not rushing to find alternative sources of wheat, however, with the county's flour milling industry body saying they have sufficient stocks for the short term.

"We haven't thought about alternatives to the grade or proposed candidates to the farm ministry (at this stage)," said Masaaki Kadota, executive director of the Flour Millers Association of Japan.

But Kadota added that it could be difficult for users to find alternative soft white types of wheat to the U.S. Western White Grade, as wheat grown in nations such as Australia and Canada is mainly the medium to hard type.

An industry official in the Philippines, which buys about 4 million tonnes of wheat a year and relies mainly on U.S. supplies, said the country could turn to Canada if it decides not to import from the U.S.

(Additional reporting by Colin Packham in Sydney, Apornrath Phoonphongphipat in Bangkok, Risa Maeda in Tokyo and Erik dela Cruz in Manila; Editing by Ros Krasny, Amran Abocar, Joseph Radford and David Gregorio)