CHICAGO (Reuters) - Monsanto Co. (NYSE:MCT - news), whose genetically modified seeds have raised environmental and health concerns among some European consumers, said Monday it would not commercialize the controversial "terminator" gene technology which sterilizes seeds.

In an October 4 letter to the Rockefeller Foundation, obtained by Reuters, Monsanto Chairman Robert Shapiro said the company decided not to develop the gene after seeking comment from the Rockefeller Foundation and other groups.

The technology, which Monsanto said was still several years away from any possible commercial production, prevents plants from producing fertile seeds, forcing farmers to buy more seed rather than using seed from the previous year's crop. Critics contend the gene hurts farmers in developing countries who can't afford to buy new seeds each year.

"I am writing to let you know that we are making a public commitment not to commercialize sterile seed technologies, such as the one dubbed 'Terminator,'" Shapiro said in the letter to Rockefeller Foundation President Dr. Gordon Conway. "We are doing this based on input from you and a wide range of other experts and stakeholders, including our very important grower constituency."

Shares of Monsanto were down 4/16 at 35-3/16 in midday New York Stock Exchange trading.

St. Louis-based Monsanto does not yet have the "terminator" gene technology, but would gain access to it through its long-planned acquisition of cotton seed breeder Delta and Pine Land Co., which is awaiting regulatory approval.

Analysts said Monsanto was wise to back away from the "terminator" gene technology as it faces fierce opposition in Europe and elsewhere to its genetically modified -- or GMO -- seeds. Monsanto's seeds are altered to resist certain crop pests, or to withstand powerful herbicides.

Critics of the biotech crops say there is not enough research to conclude the crops are safe for the environment and for human consumption. "This has really turned into a social issue, and an emotional one at that," said George Dahlman, agribusiness analyst with U.S. Bancorp Piper Jaffray in Minneapolis. "It is one more bit of fuel added to the GMO fire in Europe."

In the letter to the Rockefeller Foundation, Monsanto said it held patents on other "gene protection" technology that would discourage farmers from planting seeds from a previous crop but would not render the seeds sterile. "The need for companies to protect and gain a return on their investments in agriculture innovation is real," Shapiro said.

"Monsanto holds patents on technological approaches to gene protection that do not render seeds sterile and has studied one that would inactivate only a specific gene responsible for the value-added biotech trait.

"We are not currently investing resources to develop these technologies, but we do not rule out their future development and use for gene protection or their possible agronomic benefits," Shapiro said in the letter.

Mark Wiltamuth, agribusiness analyst with Morgan Stanley Dean Witter, said the GMO crop issue would likely prove to be far more critical than the "terminator" gene for Monsanto.

"This particular thing is not a big deal," Wiltamuth said. "Biotech is really the bigger issue. I think the second wave of biotech that adds value for consumers will help to smooth some of these waters."

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