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UPDATE 1-China turns away US distillers grains over GMO, more rejections expected -trade

Thursday, 26 Dec 2013 | 2:30 AM ET

expected -trade@

* Move follows corn rejections

* More DDGs expected to be turned away as China steps up checks

* Traders fret could be difficult to find new destinations for DDG cargoes

(Adds comment, detail)

BEIJING, Dec 26 (Reuters) - China has turned away about 2,000 tonnes of U.S. dried distillers grains (DDGs), a corn by-product, and more rejections are expected in coming weeks as Beijing imposes strict checks over an unapproved genetically-modified (GMO) strain, traders said on Thursday.

The move follows the rejection of more than half a million tonnes of U.S. corn after authorities detected the presence of MIR 162, a GMO variety developed by Syngenta AG and not approved for import by China's agriculture ministry.

"The containers, which were sealed for a while, have been rejected at a port in Shanghai," said one trader with a domestic trading house.

Another industry source confirmed the volume. Quarantine authorities in Shanghai declined immediate comment.

Traders had been fretting about possible DDG rejections after earlier saying that the strain, already approved by destinations such as Japan, South Korea and the European Union, had been found in shipments of the protein-rich product of corn ethanol.

China, the world's top buyer of U.S. DDGs, accounted for about 40 percent of U.S. exports during the 2012/13 marketing season.

Worries over possible rejections have pressured Chicago Board of Trade corn prices. Traders are concerned that cargoes will be difficult to switch to other destinations as the substitute for corn and meal in animal feed is not widely used in the rest of Asia.

They said more rejections were likely after the General Administration of Quality Supervision, Inspection and Quarantine (CIQ) this week issued a notice to local authorities asking them to step up checks for MIR 162 in DDG cargoes.

"Quarantine authorities at major ports have been notified and will be strict in testing," said another trader, with a major state-owned trading house.

"Before, authorities were just checking on selective shipments, but now all shipments will have to be tested and a large volume may be turned away."

The traders said they had asked their U.S. suppliers to halt shipments.

"It comes at short notice. The shipments already delivered may not be easily resold to other countries," said the trader.

Chinese imports of DDGs were expected to hit a record high of more than 4 million tonnes in 2013/14 due to cheap U.S. prices and strong domestic demand.

Monthly imports in December and January were estimated at between 450,000 tonnes to 500,000 tonnes. China's imports in November rose 253 percent on the year to 538,498 tonnes, almost all of which came from the U.S.

The rejection supported domestic futures prices for soymeal <0#DSM:> and rapeseed meal <0CRSM:> on Thursday. The most-active May 2014 rapeseed meal contract was trading up 1.3 percent at its highest in more than two months.

Strict testing for MIR 162 comes as Beijing seeks to curb cheap corn imports and support domestic prices for the grain, industry sources have said.

The U.S. has urged China to act promptly to approve the strain.

(Reporting by Niu Shuping and David Stanway; Editing by Himani Sarkar and Joseph Radford)