UPDATE 1-USDA's Vilsack seeks compromise on biotech crops

* Agriculture secretary promotes crop “coexistence”

* Leading farm groups say it meddles with scientific rules

* Forecast sees 3.5 percent expansion in US crop plantings

* USDA will make first official 2011 projection next month

By Charles Abbott

ATLANTA, Jan 10 (Reuters) - Agriculture Secretary Tom Vilsack told the largest U.S. farm group on Monday that farmers could see less government interference if they find a way for traditional and genetically modified crops to co-exist.

Farm groups and the biotechnology industry are skeptical of Vilsack’s “co-existence” proposal. He launched it last month at the same time the Agriculture Department said planting restrictions might accompany deregulation of biotech alfalfa.

Vilsack says the biotech alfalfa, developed by Monsanto Co MON.N, is safe. An even-handed compromise among growers would better than repeat litigation over rules for biotech crops, he said. The alfalfa dispute went to the Supreme Court and a U.S. appeals court is hearing a case on biotech sugar seeds.

Most U.S. farmers oppose government intrusion on their property.

“Every farmer ought to be able to do what he or she wants to do on their land, so we are going to continue to have that conversation,” Vilsack said at the annual meeting of the American Farm Bureau Federation (AFBF). USDA held an alfalfa “stakeholder” session in December.

Seven major farm groups, including AFBF, wrote to the White House last week to object to USDA’s path on alfalfa. They said USDA’s environmental impact statement showed there was no danger from biotech alfalfa so it is wrong “to use motives other than science to impose conditions on this crop.”

USDA is considering two options -- total deregulation or partial deregulation that could include isolation standards from other crops, set geographic restrictions on where the crop is grown, spell out harvest periods and regulate equipment use.

Foes of Monsanto’s “Roundup Ready” alfalfa say it could contaminate neighboring fields and cause losses for organic crop and dairy farmers. They say USDA does not give enough thought to preventing adverse consequences, such as development of herbicide resistant “super weeds.”

Spurred by near-record prices for grains, cotton and soybeans, U.S. farmers will expand plantings by 3.5 percent this year, said the chairman of a USDA forecasting board. That would mean an increase of nearly 9 million acres from this year and put planting on par with 2008, when futures prices set records.

“We think the price outlook is pretty good for all commodities,” said Gerry Bange, chairman of USDA’s World Agricultural Outlook Board. “There is very strong demand out there. It is beginning to push on supply, no doubt about it.”

High prices create incentives for larger corn and cotton plantings in particular, said Bange, while soybeans plantings probably will be up a little bit. He did not forecast plantings for each crop.

AFBF economist Bob Young said an increase of 5 million-6 million acres was possible, which would alleviate shrinking U.S. stockpiles. He said the increase planting would include double-cropping in some regions. Bange said idle land also would be brought into production.

Growers planted 88.2 million acres of corn, 77.7 million acres of soybeans, 53.6 million acres of wheat and 11 million acres of cotton last year.

Farmers said they focus on crop prices and farm supply costs in deciding what to plant, rather than forecasts of high food prices. While commodity prices are high, production costs are keeping pace.

“I pay a lot more attention to fuel than I do food,” said Billy Donnell, a Tennessee corn, cotton and soybean farmer. “Food prices in the grocery store, no, but what I receive for products, yes,” he said. (Additional reporting by Christopher Doering;editing by Sofina Mirza-Reid)