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* U.S. trading partners leery of genetically modified wheat
* Discovery may affect food-label fight
* Wheat sales may be hit, rice was hurt in 2006 case
By Charles Abbott
WASHINGTON, May 29 (Reuters) - A strain of genetically engineered wheat never approved for sale or consumption was found sprouting on a farm in Oregon, the U.S. government said on Wednesday, and grain traders warned the discovery could hurt export prospects for U.S. wheat.
The U.S. Department of Agriculture reported the discovery of a wheat variety developed years ago by biotechnology giant Monsanto Co to be resistant to its Roundup herbicide. It was never put into use because of worldwide opposition to genetically engineered wheat.
USDA officials said there was no sign that genetically engineered wheat had entered the commercial market.
Wheat, long known as the staff of life, is a dietary staple used in making breads, pastries, cookies, breakfast cereal, noodles and other foods. Half of the U.S. crop is exported. Major buyers include Europe, Mexico, Japan, Egypt, Nigeria, the Philippines and South Korea.
USDA officials said the U.S. Food and Drug Administration determined years ago there is no health risk to humans from the strain. Monsanto's last field tests on GE wheat were in 2005.
Michael Scuse, the acting U.S. deputy agriculture secretary, told reporters trading partners and major customers for U.S. wheat had been informed of the discovery.
"Hopefully, our trading partners will be very understanding," Scuse said.
Scuse and Michael Firko, who heads USDA's biotechnology regulatory office, said USDA was investigating how the strain could have appeared on the farm when no seeds should have been available for several years.
Alan Tracy, president of U.S. Wheat Associates, said the group was still awaiting reaction from major international wheat buyers, adding that many Asian buyers were particularly sensitive to issues with genetically modified crops.
But wheat traders were alarmed, and bracing to see how buyers would respond - starting with a regular weekly wheat tender expected from Japan on Thursday.
"Nobody's going to want to buy wheat from the PNW (Pacific Northwest) for a while," said Roy Huckabay, analyst with the Linn Group in Chicago.
"Everybody that loads wheat out there has to have a guaranteed non-GMO sticker on the load and I'm not sure the FDA is going to give them the ability to do that yet."
St. Louis-based Monsanto 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," the company said.
There is no U.S.-approved test kit to identify genetically engineered wheat. USDA said it was working on a "rapid test" kit.
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.
U.S. farmers have embraced genetically modified corn, soybeans and cotton. The bulk of such U.S. crops are genetically modified, but critics of the technology are pushing for laws that would require companies to label genetically modified food.
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.
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 genetically modified wheat sprouted this spring on an Oregon farm, in a field that grew winter wheat in 2012.
USDA officials explained that when the farmer sprayed the so-called "volunteer" plants with a glyphosate herbicide, some of them unexpectedly survived. Samples were then sent to Oregon State University and to USDA for analysis.
Testing showed the wheat was a Monsanto-developed strain resistant to glyphosate. Monsanto is assisting in the investigation, USDA said. Officials declined to give the location of the farm or the farmer's name and said they have not identified if the wheat was a spring or winter variety.
From 1998 to 2005, Monsanto tested Roundup-Ready spring wheat varieties, those resistant to spraying by the widely-used herbicide, on 4,000 acres in 17 states. There were eight field trials in Oregon from 1999 to 2001.
Two years ago, Monsanto said it was looking into genetically modified strains that would be higher-yielding or drought-tolerant but it would not work on herbicide-resistant wheat.
The USDA's Scuse said there apparently have been no other reports of glyphosate-resistant wheat over the years.
Ronnie Cummins, national director of the Organic Consumers Association, which battled to keep genetically modified wheat out of the marketplace years ago, said the discovery of the genetically modified wheat "will have a significant impact.:"
The U.S. Senate last week rejected by a wide margin a measure to allow states to order labeling of food made with genetically engineered, or GE, crops. Cummins said the discovery of the rogue plants in Oregon would accelerate efforts to require GE food labels.
USDA lists nearly two dozen "major incidents" of noncompliance with its rules on development of genetically modified since 1995, the two most recent cases in 2011. In one case, Dow AgroSciences agreed to pay a civil penalty after USDA alleged it improperly sold small amounts of corn seed in 2007 that contained low levels of an unapproved genetically modified trait.