CORRECTED - CORRECTED-UPDATE 2-South Korea quietly steps up GMO corn imports

(Corrects paragraph 1 to clarify source said imports could reach 1.2 million tonnes, not twice as much as expected) (Adds details, more comments)

By Miyoung Kim

SEOUL, July 1 (Reuters) - South Korea may import 1.2 million tonnes of genetically modified corn for food use this year, a government source said on Tuesday, more than twice as much as expected as soaring prices force companies to accelerate the switch to cheaper varieties.

South Korea, the world's third-largest corn buyer, imported 330,000 tonnes of GMO corn for food use for the first time in May and June, and this year's total may rise to 1.2 million tonnes, or about 60 percent of the total demand from the food sector, a Korea Food and Drug Administration source told Reuters.

That is far above the 500,000 tonne volume floated several months ago by the major buyers, who had indicated they would take a measured approach to shifting to cheaper GMO crops rather than risk a massive consumer backlash in one of only two Asian nations -- along with Japan -- that had stuck to non-GMO foods.

With unmodified supplies increasingly hard to find after China, once the major supplier of non-GMO corn, effectively halted overseas shipments, they've had little choice.

"We see sharply increased imports of GMO corn as buyers are struggling to secure non-GMO varieties," said the source, who declined to be named because of the sensitivity of the issue.

But the four South Korean starch makers that supply nearly 90 percent of the country's corn starch and sugar -- Daesang Corp (001680.KS), Doosan Corn Products Korea, Samyang Genex (003940.KS) and Shindongbang CP -- have opted to keep quiet about their latest deals at a time of heightened anxiety over food.

Tens of thousands of South Koreans took to the streets last month in a massive wave of protests against renewed imports of U.S. beef.

"Importers have kept corn deals secret as they fear public attention shifting back to GMO crops once beef protests die out, and losing business," said a corn trader.

GMO TABOO

South Korea, which relies on corn imports to meet 99 percent of demand and soybean imports to meet 90 percent, broke the GMO food taboo earlier this year, signing a deal to import the engineered corn for manufacturing starch and sweeteners.

The four firms indicated in February that they many have to buy more as prices soar, but have been coy on details.

Company officials declined to comment about their purchases on Tuesday.

Global corn prices more than doubled over the past 12 months and reached a record high of above $8 a bushel last month, as demand for the grain, used for food, feed and fuel, increased, while flooding in the U.S. Midwest last month raised fears of reduced supply from the world's largest corn exporter.

On Tuesday, July corn futures CN8 on the Chicago Board of Trade dropped 1.0 percent to $7.17-½ a bushel after the USDA raised its forecast for 2008 U.S. corn plantings to 87.3 million acres from its March estimate of 86.0 million.

Non-GMO corn corn cargoes can command as much as a $20 or nearly 5 percent premium to GMO varieties, eating into profit margins for companies already under pressure from competitors.

"The corn starch and sweetener market is shrinking sharply as foodmakers are switching to cheaper alternatives such as sugar to replace pricey corn," said an official at the Korea Corn Processing Association.

"Future purchases are more likely to depend on how consumers react to processed food using GMO corn," the official said.

Governments around the world have been struggling with the inflationary impact of higher food and oil prices, with corn joining a long list of staples, from rice and wheat to vegetable oils and crude oil, that have been hitting record highs.

Skyrocketing food prices are forcing South Korea, which only grows about 25 percent of the grain it needs, to switch to GMO crops. The country's consumer price inflation in 2008 is set to hit a 10-year high on soaring energy and commodities prices. [ID:nSEO309126] (Reporting by Miyoung Kim; editing by Jonathan Hopfner and Jonathan Leff)