Hudson, Wisconsin, Aug. 11 (Bloomberg) -- Organic food maker Terra Prima Inc. got a sour taste of modern food technology late last year.

After a test by an importer in the Netherlands found a trace of genetically engineered corn in Terra tortilla chips, company officials decided they couldn't sell the product as organic. More frustrating was lack of accountability for the ``contamination'' of its product. The organic farmer who sold Terra the corn said he was unaware of the problem, explaining wind probably blew corn pollen from a neighboring farm into his field.

The explanation is plausible, though most corn pollen doesn't travel more than 60 feet, said Bob Nielsen, an agronomist with Purdue University. Still, the possibility troubles not just organic producers but also farmers who don't want to be penalized for growing genetically modified food.

"You bet it raises concern," Nielsen said. "But it's going to depend on how well or how thoroughly grain will be tested for contaminants at the point of sale." Grain processors such as Archer Daniels Midland Co., food makers such as Novartis AG's Gerber baby-food unit and organic food companies such as Terra have responded to consumer concerns by demanding farmers provide corn that's not genetically engineered.

DuPont Co., Monsanto Co. and even Gerber's parent company, Novartis, have staked part of their futures on genetically engineered food. They are treading carefully to promote the technology without contributing to consumer fears.

Food Safety Scares

European consumers, shaken by food safety scares such as the 1996 outbreak of mad-cow disease in the U.K and more recently dioxin-tainted chicken in Belgium, are especially distrustful of the technology, which involves altering genetic traits of corn, soybeans and other crops so they can resist pests or withstand greater doses of weed killer.

The Terra chips tested in Europe contained genetically modified corn that included the bacteria Bacillus thuringiensis, or Bt, a toxin that kills the destructive European corn borer. Terra, based in Hudson, Wisconsin, decided to destroy 87,000 bags of the contaminated chips at a cost of $147,000. For a company with about $2.5 million in sales, the loss was sizable, said Melodi Nelson, vice president of the closely held food maker.

She doesn't blame the organic farmer who sold Terra the corn and said the source of the contamination wasn't clear.

"I'd like to see a moratorium on genetically modified crops until they can reassure us that we won't have cross- pollination," Nelson said.

Monarch Butterflies

Bt corn moved into the spotlight in May, when a Cornell University researcher found that monarch butterfly larvae that feed on its pollen could die. The findings contributed to investor apprehension about Monsanto, which has borrowed heavily to acquire seed companies to market its genetically-modified crop technology.

Shares of Monsanto have fallen 17 percent this year and traded this week as low as 38 3/4, down from a high of 50 13/16 in March.

The issue is not likely to blow over. An estimated 38 percent of this year's U.S. corn crop and nearly half of the U.S. soybean crop was planted with genetically engineered seeds.

"This is really indicative of how this biotechnology is going to change how we grow food in the United States," said Scott McFarland, director of industry relations for the National Corn Growers Association. "There's a lot more risk than farmers have taken on in the past."

Insurance Questions

Farmers who use the technology are concerned about liability, if they are accused of contaminating other crops, because crop insurers haven't addressed the issue.

John Nelson, president of Acceptance Insurance Cos. in Omaha, Nebraska, said his company doesn't offer a policy to cover a lawsuit related to genetically engineered seeds. The company's American Agrisurance unit is the third biggest U.S. crop insurer. Nelson said he's studying the issue.

Some farmers are looking to the seed companies for guidance, which so far, they haven't offered. "We couldn't get to any resolution," said Kyle Phillips, a corn grower in Knoxville, Iowa.

Doyle Karr, a spokesman for Des Moines-based Pioneer Hi-Bred International Inc., said, "We're looking at it but we haven't given any guidance. The difficult thing is it's hard to prevent." DuPont plans to buy Pioneer, the world's largest seed company, in the next two months.

A Novartis official said organic farmers could reduce the risk of contamination if they follow standard farming practices like creating a buffer between neighboring fields and planting at different times than their neighbors.

If an organic farmer "wishes to ensure no corn pollen in his fields, he needs to take the necessary precautions," said Jeff Stein, director of regulatory and government affairs for Novartis' U.S. crop business.

Some organic farmers may be considering lawsuits against their neighbors, said Bob Scowcroft, spokesman for the Organic Farming Research Foundation. The issue was top of the agenda at a San Francisco-area organic food conference earlier this month. Others would "prefer to be more proactive" and work out a compromise with their neighbors, said Ken Rosmann, marketing director for Heartland Organic Marketing Cooperative, representing 140 organic farmers in Iowa and Missouri.

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