UPDATE 2-China rejects more U.S.corn amid rising trade conflict

Wed Dec 11, 2013 11:35pm IST

* Four U.S. cargoes already rejected since mid-November

* Three more cargoes may face rejection -traders

* Rejections follow trade conflict, record domestic output

* China 2013 corn output seen record high-CNGOIC (Updates with USDA data on China corn purchases, analyst quote, price movement)

BEIJING, Dec 11 (Reuters) - China has blocked the entry of another U.S. corn cargo, and three more may be turned away, after tests found a strain of unapproved genetically-modified (GMO) corn.

But some believe the rejection may have been prompted by other trade disputes between the two countries.

The latest cargo of 59,100 tonnes was denied entry on Tuesday after quarantine officials in the eastern province of Zhejiang detected MIR 162, a GMO strain not yet approved for import by the agriculture ministry, a quarantine official said.

Since the middle of November, quarantine authorities in China, the world's second largest corn consumer, have already turned away about 180,000 tonnes of the grain.

"It is really causing big trouble and it seems to be related to bilateral trade conflicts," said a corn trader with a domestic trading house.

U.S. government data shows that China's appetite for corn remains strong. It was the top destination for U.S. supplies last week, which analysts say outweighs any concerns about the rejections of a few cargoes.

The U.S. Agriculture Department said on Monday it inspected 17.6 million bushels of corn earmarked for China last week, which made up 44 percent of the total amount of corn the government inspected.

"If they are still importing it, it makes us wonder if this is more of a political game that China is playing," said Terry Reilly, senior commodity analyst at Futures International. "As long as China is taking U.S. corn on a weekly basis ... we are not going to get bearish on this topic."

About 2 million tonnes, or 78.736 million bushels, of U.S. corn is headed for China in ships and China has already committed to buying another 3 million tonnes of the U.S. grain.

China last month fought back against accusations by the United States that it was blocking a World Trade Organisation technology deal, with Commerce Minister Gao Hucheng calling the United States "irresponsible".

This month, China also launched a trade dispute against the United States to challenge Washington's accusations of having dumped cheap exports on the U.S. market.

Traders said another three cargoes had already tested positive for MIR 162, a GMO strain developed for insect resistance, and were expected to be turned away from ports in Guangdong and Fujian. Some are not even being unloaded, making it easier to ship them to other markets, including Japan.

"Rejections will be frequent, following large arrivals in coming weeks," said one industry source who asked not to be identified, due to the sensitivity of the issue.

"Some cargoes simply berth offshore and buyers are not unloading the cargoes before testing results are complete."

The U.S. corn market appeared unaffected by China's rejection. Chicago Board of Trade March corn futures were up 2 cents at $4.29-1/2 a bushel late Wednesday morning. Prices have increased 4.2 percent since China's first rejection in November.

Large volumes of the rejected corn have been snapped up by importers in other Asian countries, sometimes with price cuts, European traders said.

China expects a record corn harvest this year and faces a massive glut due to weak consumption by the animal feed industry.

Its corn output in 2013/14 is likely to rise 5.9 percent on the year to a record 217.7 million tonnes, surpassing consumption, seen at 197 million.

The country's corn consumption fell 1.1 percent from the previous year, partly due to outbreaks of bird flu early in 2013, the China National Grain and Oils Information Center (CNGOIC) says.

(Reporting by Niu Shuping and David Stanway in Beijing and Mak Weinraub in Chicago; Editing by Clarence Fernandez and Bob Burgdorfer)

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