RAY SUAREZ: Now a corn controversy. Jeffrey Kaye of KCET.-TV-Los Angeles reports from Iowa.

JEFFREY KAYE: The elevator in superior has serviced farmers in northwest Iowa for 80 years. Loads of newly harvested grain are shipped in, stored and moved out. Among other customers, the elevator supplies the giant Archer Daniels Midland processing plant in Cedar Rapids. It turns corn into a variety of food products as well as ethanol. But that food chain was broken in October. Tests of a trainload of corn from Superior showed it contained "starlink." That's a genetically altered corn; it's been banned by the US Environment Protection Agency for human use because it may cause allergic reactions. ADM rejected the shipment. So superior elevator manager Gary Strube sold it for animal feed, which is an approved use.

GARY STRUBE: Roughly this last train that left here cost about $22,000.

JEFFREY KAYE: You lost that much?

GARY STRUBE: Lost that much.

JEFFREY KAYE: Strube found himself at the center of a high-tech agricultural uproar involving the genetically modified super seed. "Starlink" was supposed to be a boon to American farmers, but instead it's turning into a multi-million dollar disaster. The "starlink" furor started in September after Friends of the Earth, an environmental group, discovered "starlink" corn in taco shells. By the end of October, nearly 300 corn products were recalled, the first-ever involving a genetically-modified crop. The fact that "starlink" had made its way into the food supply-- and might have stayed there if not for the environmental group-- called into question the marketing, planting, handling and regulation of genetically-engineered seeds.

NEIL HARL: So this kind of a plan has...

JEFFREY KAYE: According to Neil Harl, an agricultural economist at Iowa State University, the discovery sent shock waves through the agricultural world.

NEIL HARL: It's a shot across the bow of biotechnology, agricultural biotechnology. The important point is that the world is watching to see if we are capable of handling the technology that we, the United States, have created here. For if we are not capable of handling it, this will have, I think, an adverse effect upon our products in world channels.

JEFFREY KAYE: Corn is a multi-billion dollar food industry. Giant processors turn the grain into products used in chips, sweeteners, starch, oil, flour, and cereals. In Iowa, the economy depends on corn production. Iowa exports corn to 55 countries and produces 19% of the domestic corn. Farmers there planted 135,000 acres of "starlink"-- 40% of the US "starlink" crop. "Starlink" seemed like a good idea to farmers Dave and Diane Marty of Lu Verne, Iowa. They planted 160 acres of it, hoping it would control a serious pest. "Starlink" has been genetically modified so as to be poisonous to a corn-munching caterpillar, an insect blamed for yearly crop losses of a billion dollars.

DAVE MARTY: This plant is naturally toxic to your European corn borer, and that's why we planted it. And it also has some resistance to the rootworm beetle and that's why we use it. We're using it to actually cut back on pesticide use.

JEFFREY KAYE: But why would farmers plant corn if they could not sell it for human consumption? The farmers had reason to believe "starlink" would be approved by this year's harvest.

DAVE MARTY: We were all hoping and it should have been cleared for food use too, domestic use.

JEFFREY KAYE: The seed was produced by a subsidiary of French-owned Aventis, the world's largest agrochemical company. Aventis would not provide a spokesman for this story. More than 90% of "starlink" was sold by based-based Garst Seed Company.

DARRELL STALEY: I think "starlink" was very important to Garst because it was a new technology that nobody else had at the time.

JEFFREY KAYE: According to Darrell Staley, a former district sales manager, Garst officials told their sales staff that "starlink" would be approved for human consumption before the harvest.

JEFFREY KAYE: What was the message you were told to deliver to farmers about the use of this?

DARRELL STALEY: Well, that the approval for European production was in the works, and the EPA or whoever was supposed to approve it in Washington, DC, was working on it and should be approved by harvest time.

JEFFREY KAYE: A Garst spokesman, who would not go on camera, admitted Garst told its sales force that the EPA, the US Environment Protection Agency, was expected to deem "starlink" fit for human consumption by the harvest. The seeds' developer, Aventis, has pressed for approval but the EPA has made no such decision. When it approved "starlink" in 1998, the agency ruled that it would have to be kept separate from other corn. But former Garst employees say the seed company failed to emphasize that requirement. As a result, Randy Schleusner is now sitting on 60,000 bushels of consider starlink", some of which he fed to his livestock. The elevator that normally takes his grain won't buy "starlink." He bought and sold seed for Garst but he says he was never told to warn customers about the requirement for special handling.

RANDY SCHLEUSNER: Well, at the time, I mean, there really wasn't any. I did not know of anything - if it was going to create a problem. If I knew it was going to create a problem, I would have told them to take the damn stuff back last spring. I would not have planted it, plain and simple.

JEFFREY KAYE: EPA officials expected "starlink" would be carefully separated from other corn at every stage in the production pipeline: During planting, growing, harvesting, transportation, storage and processing. That condition was a task the industry wasn't prepared for.

NEIL HARL: Unfortunately, the world doesn't operate so neatly as that. It isn't just the amount from the acreage that was planted with "starlink." It's that this has been multiplied by virtue of contamination, by virtue of pollen drift, by virtue of commingling. And so we were not equipped to handle a two-track system: One for "starlink" and one for everything else.

JEFFREY KAYE: In the fields, the most painstaking precautions can be undone by a gust of wind, which can carry "starlink" pollen to non-"starlink" crops where it can cross pollinate. As a result, farmers now have to treat their entire corn crop as if it were "starlink".

DAVE MARTY: So I'm sitting on -- probably 100% of all my grain corn this year is going to be "starlink."

JEFFREY KAYE: Because you've planted your "starlink" right next....

DAVE MARTY: Right next to regular hybrids and what's happened for us, for us to save ourselves, maybe being in trouble we're going to have to call it all "starlink."

JEFFREY KAYE: After the recall hit, elevators, which store grain, found to their surprise that "starlink" had been mixed in with other corn deliveries.

GARY STRUBE: We knew "starlink" was being planted. But, you know, hopefully everyone was going to do the right thing.

JEFFREY KAYE: Which would have been what?

GARY STRUBE: Which would have been to keep it separate, kept it at home.

JEFFREY KAYE: And told you if they were bringing it in.

GARY STRUBE: Yeah.

JEFFREY KAYE: And did anyone tell you if they were bringing it in?

GARY STRUBE: No, they didn't.

JEFFREY KAYE: Because there is no way to identify "starlink" grain short of chemical tests, Gary Strube says he has to consider all 5 million bushels of corn already in his elevator contaminated, fit only for animal feed. Throughout the area, the purity of the corn is under suspicion.

NEIL HARL: It is, I think, safe to say that every load is a suspect load until it's tested, at least in parts of the country.

JEFFREY KAYE: So guilty until proven innocent, essentially?

NEIL HARL: That's about the way it works.

JEFFREY KAYE: Fearing loss of consumer confidence, a few industry giants temporarily shut down corn processing plants to ensure that no "starlink" go into their foods. At ADM in Cedar Rapids, inspectors now take samples from truckloads of corn and test for the presence of "starlink." They reject two or three loads a day out of four or five hundred.

SPOKESMAN: Ticket numbers up to 372 are okay to dump.

JEFFREY KAYE: Aventis has pledged to buy up the "starlink" crop if it was grown, stored and shipped according to EPA's conditions. Which raises another issue: Whose job was it to ensure that "starlink" was handled properly? The EPA expected Aventis to enforce the regulations. But according to Iowa State Agriculture Secretary Patty Judge, neither Aventis nor government officials policed "starlink".

JEFFREY KAYE: Was any regulatory agency-- federal or state-- monitoring how the crops were produced and processed?

PATTY JUDGE: I am really going out on a limb by saying this, but in my opinion, no. Other than that, the corn was approved by EPA for planting and the tags were affixed to the bags that said it could not go into the food chain.

JEFFREY KAYE: The judge says Iowa, like other states, was not prepared for "starlink".

PATTY JUDGE: Iowa is not set up-- and this is a bigger issue that we know is facing us and something that we are trying to think about very hard here. We know that the future is going to be about biotechnology. We have got a glitch now, a problem that we are going to correct. Until we can have some system for grain segregation in the country, we need to be more careful than we were this time about planting before we have full approval because really we do not have very good ways right now of segregating grain.

JEFFREY KAYE: At the EPA in Washington, deputy administrator Stephen Johnson said officials believed the grain could be kept separate. Johnson called Aventis' failure to enforce the terms of the "starlink" registration outrageous and illegal. He says his agency is unlikely to give future approval for a gene-altered crop unless it is also deemed safe for human consumption.

STEPHEN JOHNSON: Clearly, a lesson learned here with the "starlink" situation is that clearly the company violated the law. Is additional oversight needed to ensure that someone didn't violate the law? Well, in this case, we needed to. But as I said earlier, I think the issue here of the split registration, given what's happened, and given the fact that Aventis, if you will, broke the law, it will be unlikely for us to ever approve split registration again.

JEFFREY KAYE: Second thoughts don't help elevator manager Gary Strube.

GARY STRUBE: I'm mad, yeah, but I'm not mad at our producers. If I'm mad at anyone, I'm mad at Aventis, how they could even market such a thing. The old corporate "sell it anyway" attitude. This thing could hurt a lot of people.

JEFFREY KAYE: Strube worries that even purchasers of "starlink" for animal feed will stop buying, fearing a lack of public confidence.

SEN. TIM HUTCHINSON: The fact that "starlink" corn has made its way into our food supply has prompted serious questions about how this may have happened.

JEFFREY KAYE: The "starlink" furor resulted in a congressional hearing as to what went wrong. The testing of millions of bushels of grain for "starlink" continues, not only by processors but by environmental groups in the US and abroad. The US Food and Drug Administration is also testing corn products, but officials won't discuss the scope of the investigation. The EPA has agreed to review an Aventis request that "starlink" be approved for human consumption. Aventis has suspended sales of the genetically modified corn seed.

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