UPDATE 2-Bill Gates says ideology threatens hunger fix

* Fight over GMO crops threatens work on hunger

* Biotechnology one of many tools needed to raise yields

* Gates funding to focus on small-holder farmers

* Working on "royalty-free" drought-resistant maize

* G8 must spell out details of its ag development funding (Adds new quotes from Gates, AGRA president Ngongi)

By Christine Stebbins and Roberta Rampton

DES MOINES, Iowa, Oct 15 (Reuters) - The fight to end hunger is being hurt by environmentalists who insist that genetically modified crops cannot be used in Africa, Bill Gates, the billionaire founder of software giant Microsoft (MSFT.O), said on Thursday.

Gates said GMO crops, fertilizer and chemicals are important tools -- although not the only tools -- to help small farms in Africa boost production.

"This global effort to help small farmers is endangered by an ideological wedge that threatens to split the movement in two," Gates said in his first address on agriculture made during the annual World Food Prize forum.

"Some people insist on an ideal vision of the environment," Gates said. "They have tried to restrict the spread of biotechnology into sub-Saharan Africa without regard to how much hunger and poverty might be reduced by it."

The Bill and Melinda Gates Foundation in recent years has turned its focus to helping poor, small-holder farmers grow and sell more crops as a way to reduce hunger and poverty.

The foundation, which has committed $1.4 billion to agricultural development efforts, announced on Thursday nine new grants worth a total of $120 million aimed at raising yields and farming expertise in the developing world.

Funding will go to legumes that fix nitrogen in the soil, higher-yielding varieties of sorghum and millet, and new varieties of sweet potatoes that resist pests, Gates said.

The Alliance for a Green Revolution in Africa (AGRA) will get $15 million to help train analysts and encourage farmer-friendly policies on seeds, markets, land tenure and women's rights in five countries that have made strides in developing agriculture.

"Externally imposed solutions do not necessarily work," AGRA President Namaga Ngongi told Reuters, noting "people who are likely to live with the consequences of the decisions if they do not work" need to be more involved.

Gates told the World Food Prize forum, which honors people who make major contributions to reducing hunger, that farmers need training and access to markets, not just new seeds.