China's quality watchdog has turned away more corn cargoes from the United States due to the discovery of a genetically-modified strain not approved by Beijing and further rejections are likely, traders said.

They said that a report on Monday by the official Xinhua news agency that China had rejected 601,000 tons of corn and corn by-products from the U.S. by the end of last year suggested that more corn cargoes had been turned away since Dec. 20, when 545,000 tons of the grain had been refused by the General Administration of Quality Supervision, Inspection and Quarantine (AQSIQ).

"China's feed demand is pretty weak and we understand there are more cargoes of this unapproved variety on the way," said one Singapore-based grains and oilseeds trader, referring to the MIR 162 variety developed by Syngenta AG.

"There could be more rejections and it is very bad for trade as losses are mounting."

Xinhua, citing AQSIQ, did not give any further details on the rejections. China has also been turning away U.S. dried distillers grains (DDGs) and has imposed strict checks on the corn by-product.

"We expect more cancellations as both buyers and suppliers are increasingly uncertain on the situation. Suppliers are not delivering any cargoes, which bear the risk of rejection," said one industry source, who declined to be identified.

The strict inspections triggered Chinese buyers to cancel their largest U.S. corn purchases in 14 months last week, while several more cargoes of the grain initially bound for China were diverted to other Asian nations.

Chicago corn futures, which have been under pressure from rising global supplies and China's cancellation of U.S. cargoes, climbed half a percent on Monday, tracking gains in wheat.

Ample supplies amid weak domestic demand have pressured Dalian corn prices, with the most-active contract down by more than 1 percent since the first cargo was rejected in mid-November.

China's corn harvest due in September and October 2013 was up 5.9 percent on the year at a record high 217.7 million tons, surpassing consumption seen at 197 million tons for the year.

Strict Testing

The U.S. price of DDGs has slid 20 percent in a week as exporters shy away from selling the corn-based feed grain to its top customers in China after Beijing rejected shipments containing the strain.

China's quality watchdog issued a notice to local authorities and asked them to increase testing of U.S. DDG shipments after the GMO strain was detected in two batches of shipments totalling 758 tons on Dec. 23, said the administration in a statement on its website on Dec. 30 (www.aqsiq.gov.cn).

Buyers are trying to delay customs clearance while some are trying to postpone and cancel future shipments, traders said.