December 12, 2013 / 11:26 PM / 6 years ago

U.S. traders fear rejection of corn byproduct by GMO-wary China

Dec 12 (Reuters) - China has already rejected three cargoes of U.S. corn because of an unapproved GMO variety and now U.S. exporters are concerned some shipments of dried distillers’ grains, a corn byproduct, may be rejected for the same reason, trade sources said.

The concerns were tied to ideas China, the world’s leading importer of commodities, will increase testing for MIR162, the unapproved variety commonly known as Agrisure Viptera corn by Syngenta AG.

The variety was suspected to have been found in several containers of dried distillers’ grains, known as DDGs, at ports in northern and southern China, according to a trade report from Chinese analyst JC Intelligence that was seen by Reuters.

The 4,000 to 5,000 tonnes of DDGs shipments have not yet been rejected and are awaiting review by quarantine authorities, the JCI report said.

DDGs, a byproduct of ethanol production, are a protein-rich animal feed exported primarily in intermodal containers. China is the top global buyer, accounting for about 40 percent of U.S. exports during the 2012/13 marketing season, U.S. Agriculture Department data shows.

This is not the first time DDGs have been in China’s crosshairs. The country in 2010 accused the United States of “dumping” the animal feed there before ending the probe in June of 2012.

Talk that China was holding DDGs at ports weighed on Thursday’s corn futures at the Chicago Board of Trade, with futures plunging up to 2 percent during a session that also had pressure from a group of Senators introducing a bill to repeal the mandatory use of corn-based biofuels in the United States.

“Everyone is talking about DDGs cancellations due to the presence of MIR162. DDGs cancellations are a bigger concern than corn because they won’t be able to switch volumes of DDGs to other destinations the way they have done with corn,” said a Minnesota-based animal-feed trader who asked not to be named.

China purchased more than 500,000 tonnes of DDGs in October after importing a record 2.8 million tonnes during the previous marketing season, USDA said.

Earlier rejections of three bulk corn cargoes and several container shipments have generated more headlines than market reaction as the rejected vessels could be easily resold to other importers.

Nearly 2 million tonnes of U.S. corn heading to China face stringent testing for the unapproved GMO variety after several cargoes were denied entry by state quarantine authorities.

USDA data on Thursday showed U.S. corn exports to China continued at a brisk pace despite the GMO rejections.

One major container exporter outside of Chicago, in the nation’s busiest rail hub, has halted shipments of corn to China due to concerns they could be rejected.

“We are now canceling any unshipped corn. Risk is too high in corn,” the exporter said on Wednesday.

MIR162, designed to offer enhanced protection against crop-damaging insects, is approved for import by all major global corn buyers but has been awaiting final approval from China for more than two years. The variety is believed to already be commingled with much of the U.S. corn supply.

DDGs produced with MIR162 corn also contain the GMO material, but in a higher concentration.

The cause for the uproar by China about a GMO variety approved by all other major importers including the European Union, a notoriously difficult market for GMO approvals, may be related to a recent drop in U.S. prices and the arrival of China’s massive domestic harvest, analysts said.

“They had record production so time is on their side. We have vessels in the water, and they don’t need them. They can drag their feet on this whole approval process, if they want to,” said Shawn McCambridge, analyst with Jefferies Bache.

“The market wants to see resolution of the whole China issue.” (Additional reporting by Christine Stebbins, Julie Ingwersen and Mark Weinraub in Chicago; Editing by Bob Burgdorfer)

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