US genetically modified wheat stokes fears, Japan cancels tender

This is seriously bad news for the US economy for which wheat is a major export

http://www.reuters.com/article/2013/05/30/us-wheat-asia-idUSL3N0EB1JC20130530

* Japan cancels tender to purchase U.S. wheat

* Asian consumers jittery about gene-altered food imports

* Importers to seek details from U.S. government (Recasts with details, quotes)

By Naveen Thukral and Risa Maeda

SINGAPORE/TOKYO, May 30 (Reuters) - A strain of genetically modified wheat found in the United States fuelled concerns over food supplies across Asia on Thursday, with major importer Japan cancelling a tender offer to buy U.S. grain.

Other top Asian wheat importers South Korea, China and the Philippines said they were closely monitoring the situation after the U.S. government found genetically engineered wheat sprouting on a farm in the state of Oregon.

The strain was never approved for sale or consumption.

Asian consumers are keenly sensitive to gene-altered food, with few countries allowing imports of such cereals for human consumption. However, most of the corn and soybean shipped from the U.S. and South America for animal feed is genetically modified.

"We will refrain from buying western white and feed wheat effective today," Toru Hisadome, a Japanese farm ministry official in charge of wheat trading, told Reuters.

The U.S. Department of Agriculture on Wednesday said the wheat variety was developed years ago by biotechnology giant Monsanto Co. It was never put into use because of worldwide opposition to genetically engineered wheat.

Wheat, long known as the staff of life, is the world's largest traded food commodity and it is used in making breads, pastries, cookies, breakfast cereal and noodles.

Asia imports more than 40 million tonnes of wheat annually, almost a third of the global trade of 140-150 million tonnes. The bulk of the region's supplies come from the United States, the world's biggest exporter, and Australia, the No. 2 supplier.

The USDA said there was no sign that genetically engineered wheat had entered the commercial market, but grain traders warned the discovery could hurt export prospects for U.S. wheat.

"Asian consumers are jittery about genetically modified food," said Abah Ofon, an analyst at Standard Chartered Bank in Singapore. "This is adding to concerns that already exist on quality and availability of food wheat globally."

In 2006, a large part of the U.S. long-grain rice crop was contaminated by an experimental strain from Bayer CropScience , prompting import bans in Europe and Japan and sharply lowering market prices. The company agreed in court in 2011 to pay $750 million to growers as compensation.

BUYERS CAUTIOUS, SEEK DETAILS

A major flour miller in China, which has been stocking U.S. wheat in recent months, said importers will tread carefully.

China has emerged as a key buyer of U.S. wheat this year, taking around 1.5 million tonnes in the past two months. Chinese purchases in the year to June 2014 are estimated to rise 21 percent to 3.5 million tonnes, according to the USDA, with most shipments coming from the United States, Australia and Canada.

Japan's Hisadome said the government has asked U.S. authorities to provide more details of their investigation and Japan will stop buying the wheat concerned, at least until a test kit is developed to identify genetically modified produce.

There is no U.S.-approved test kit to identify genetically engineered wheat. The USDA has said it is working on a "rapid test" kit.

The Philippines, which buys about 4 million tonnes of wheat a year and relies mainly on U.S. supplies, is waiting for more details from the USDA before acting, an industry official in Manila said.

An agriculture ministry source in South Korea said the government is reviewing the discovery, adding the country thoroughly inspects products from the United States as part of safety checks.

"I won't be surprised if other countries start cancelling or reducing their purchases of U.S. wheat, particularly Asian countries, putting pressure on wheat demand," said Joyce Liu, an investment analyst at Phillip Futures in Singapore.

The benchmark Chicago Board of Trade wheat futures eased half a percent on Thursday after rallying in the previous session.

Genetically modified crops cannot be grown legally in the United States unless the government approves them after a review to ensure they pose no threat to the environment or to people.

Monsanto entered four strains of glyphosate-resistant wheat for U.S. approval in the 1990s but there was no final decision by regulators because the company decided there was no market.

The St. Louis-based firm downplayed the incident in a statement posted on its website. "While USDA's results are unexpected, there is considerable reason to believe that the presence of the Roundup Ready trait in wheat, if determined to be valid, is very limited," it said.

Still, importers are not in a position to shun wheat from the United States, which accounts for about a fifth of the global supplies, analysts and industry officials said. (Additional reporting by Karl Plume in CHICAGO, Niu Shuping in Beijing, Erik dela Cruz in MANILA, Jane Chung in SEOUL and Yayat Supriatna in JAKARTA; Editing by Amran Abocar and Richard Pullin)