SYDNEY - Australia's big grains export industry has begun cashing in on worldwide consumer fears about genetically modified (GM) food by selling canola to Europe with a non-GM price premium.

The sales involve about 150,000 tonnes of canola, for shipment early next year at a non-GM premium of about US$5 a tonne, well-placed industry sources told Reuters.

This was a clear-cut example of how Australia, which has so far resisted following Canada and the U.S. into genetically modified food crops, was making hay while the sun shines, analysts say.

A perceptual advantage which Australia was clearly beginning to enjoy over its North American GM-producing rivals was reinforced by United States farmers virtually giving up on strict separation of genetically modified (GM) grains from conventionally produced grains, analysts and traders also said.

"Problems being experienced in the U.S. of separating GM grains could have short-term benefits for Australia," national wheat exporter AWB Ltd said in a statement issued to Reuters through its spokeswoman.

"We have GM-free products and if they've experiencing problems in providing GM-free product, that gives us an obvious advantage in the short-term," she said.

Neither Australia nor the U.S. presently produce GM wheat, but U.S. problems with separating GM from non-GM corn and soybean crops was giving Australia a perceptual advantage on export markets, the AWB spokeswoman said.

NON-GM CANOLA SCORES FIRST PREMIUMS

Australia's non-GM canola competes directly with Canadian GM canola on export markets, and here consumer resistance, strengthened by the U.S. inability to separate all GM grains from non-GM grains, was boosting Australian sales, traders said.

"We believe that we're starting to see the early stages of the much-waited premium for non-GMO canola," one well-positioned grains trade source told Reuters, requesting anonymity.

New crop forward business had been done between Australia and Europe for the new crop canola, to large crushing companies.

This was for shipment January onwards at a time and price indicating a premium on current Canadian sales to China, he said.

It was hard to gauge the exact premium because currencies, freight rates and futures all came into play.

But the premium appeared to be up to US$5 a tonne on the current stable market of around the mid-US$190s fob, the source, with one of Australia's leading grains export boards, said.

Shipments were expected to involve around three Panamax loads of 50,000 tonnes each, he said.

An admission this week by the National Grain and Feed Association in the U.S. that less than 10 percent of the U.S. grains industry was segregating GM from non-GM grains in the present record harvest year has also confirmed sneaking suspicions held by consumers and in Australia's non-GM farmers.

"Less than 10 percent of the industry is engaged in segregation and we don't anticipate a strong need for it this fall," Thomas O'Connor, National Grain and Feed Association director of technical services, told Reuters in Chicago.

AUSTRALIA BRACES FOR GM DILEMMA

While the U.S. dilemma is advantageous to Australia at present, AWB's spokeswoman said yesterday that Australia could be facing similar issues in the longer-term.

"We're GM-free now. We may not always be," she said. The Australian industry was taking a very serious look at the matter and adopting a coordinated approach, she said.

Australia so far produces no GM grains, with first production of its first modified grain crop, canola, at least two years away. Wheat is Australia's leading grain, holding a share of almost 20 percent of the world market.

"Who knows?" the AWB spokeswoman said when asked if Australia would be producing GM wheat in the future. "It's still a few years away."

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