UPDATE 2-China finds unapproved GMO corn in more US cargoes, rejection likely -traders

Tue Dec 3, 2013 4:18am EST

* Possible rejection sparks worry among China buyers

* New China orders for U.S. corn could decline sharply -traders

* Follows shipment that was turned away in mid-Nov

* MIR 162 corn expected to get China approval soon

* Variety is already shipped to top corn importer Japan, EU

By Niu Shuping and David Stanway

BEIJING, Dec 3 (Reuters) - China, one of the world's largest corn importers, is likely to reject more U.S. shipments of the grain after they were found to contain a genetically modified variety not approved by Beijing, traders said.

That has sparked fears that other cargoes could be turned away, with some traders and buyers warning that uncertainty over the discovery could prompt a sharp decline in new Chinese orders for U.S corn.

"We are completely lost and have no idea how to deal with the situation," said one executive with a major animal feed mill.

"Not all corn cargoes were blocked for entry, but it is a messy situation."

An initial U.S. corn cargo was rejected in mid-November due to the discovery of the same variety, Syngenta AG's Agrisure Viptera, at a time when U.S. corn exports to China have been soaring as Beijing grapples with record-high domestic corn prices and rising demand for food.

Traders have said that the variety, also known as MIR 162, is set to be approved by China soon. It is already shipped to destinations such as top corn importer Japan, South Korea and the European Union.

Slowing Chinese demand would drag further on global prices that have dropped around 40 percent so far this year on expectations of a bumper U.S. harvest. Chicago Board of Trade December futures eased on Tuesday in Asia.

One cargo of about 60,000 tonnes in the southern province of Fujian was found to be tainted with MIR 162, traders said on Tuesday.

The same GMO strain was found in another 49 containers, equivalent to 1,225 tonnes, at the port of Shenzhen, they said. It was Shenzhen's quarantine authority that last month rejected one cargo of the grain from the United States containing MIR 162.

"Since this is the same GMO in the latest discovery, the shipments may have to be blocked for entry," said one trader.

Quarantine officials at Fujian, Shenzhen and Beijing declined to make immediate comment.

POSSIBLE DELAYS

Buyers said that they were unlikely to place new orders while shipments were in danger of being rejected.

"The latest discovery is bad news for some buyers ... and will slow imports," said Li Qiang, chief analyst with Shanghai JC Intelligence Co. Ltd. (JCI).

Some U.S. exporters have already been in talks with Chinese buyers over possible delays in existing orders in the wake of the first GMO discovery, the China National Grain and Oils Information Center (CNGOIC) said in a report.

The official think-tank earlier estimated China's corn imports in December would be about 1.75 million tonnes.

China is expected to import a record 7 million tonnes of corn in the 2013/14 (Sept/Aug) marketing year, up from 5.23 million tonnes the previous year, according to the U.S. Department of Agriculture (USDA).

The U.S. supplied nearly 94 percent of China's corn imports in the first 10 months of 2013.

China already allows imports of 25 different GMO corn varieties and is considering adding other commonly cultivated kinds to the list, including Agrisure Viptera, which has been pending approval for about 18 months.

Designed to offer enhanced protection against crop-damaging insects and widely grown in the U.S., it was expected to get the green light later this year or in 2014, according to traders.

A bulk corn shipment from Argentina was cleared for import earlier this year despite it containing traces of MIR 162.

The latest possible rejection comes as Beijing gets into full swing stockpiling its domestic corn harvest in the major growing provinces in the northeast, aiming to shore up domestic prices and help farmers.

Beijing is offering subsidies to feed mills in buying domestic corn due to tight storage capacity. Domestic demand has been weakening, while the country, the world's second largest corn consumer, is expected to harvest a record crop this year.

Government stockpiles are expected to double to around 60 million tonnes in 2013/14 - nearly 30 percent of the country's annual consumption.

China turned into a net corn importer in 2011 as domestic production failed to meet rising demand driven by more meat consumption as the country urbanises.

The U.S. historically is the world's top supplier of corn, exporting between 10 and 20 percent of its harvest each year.