CUIABÁ, Brazil, May 11 (Reuters) - A movement to replace genetically modified soybeans with conventional seeds is gaining traction in Brazil’s largest soy- producing state of Mato Grosso as farmers anticipate growing demand from Asia and Europe.

Brazil was an early adopter of transgenic crops and more than 96 percent of its soy harvest is of GM varieties, which helped to transform the country into the world’s largest soy exporter.

Biotech crops, such as corn, soybeans and cotton, are genetically modified to resist pests or disease, tolerate drought or withstand sprayings of weed killers like glyphosate, the active ingredient in Monsanto Co’s Roundup herbicide.

Wininton Mendes, coordinator of a program to promote use of conventional seeds run by Mato Grosso growers and the government agricultural research agency Embrapa, said doubts related to the impact of GM food on human health is one driver behind demand for conventional raw materials.

Proponents of biotech crops say the technology lowers the cost of food and helps farmers to manage pests and diseases more safely. But some consumers and environmental groups argue that GM crops boost pesticide use and pose threats to the environment and human health.

Mendes said that Mato Grosso’s drive to plant more conventional soy is backed by three trading firms - including Amaggi SA, owned by the family of Agriculture Minister Blairo Maggi - which pay a premium. The other two traders are Imcopa International SA and Caramuru Alimentos SA.

The average premium stood at 12 reais per 60-kilogram bag of GM-free soy this season, he told Reuters.

Reintroduction of conventional soy creates a niche market for farmers with deep pockets, since non-GM crops require strict controls to avoid contamination during production and shipping, which may raise costs.

Encouraged by the premia paid this season, farmers may plant more non-GM soy in the next cycle, according to Daniel Ferreira, the superintendent of agricultural research agency Imea.

FARMERS SHIFTING

Endrigo Dalcin, who planted 1,500 hectares (3,700 acres) of GM-free soy this harvest, plans to almost double that in the 2017/18 crop.

“Some farmers in Mato Grosso are already planting 100 percent GM-free thanks to the premium and international demand,” Dalcin said.

However, for many farmers the difficulty remains the availability of seeds.

An estimated 13.6 percent of the 2016/17 soybean harvest in Mato Grosso was conventional, according to agricultural research agency Imea. This was down slightly from 15 percent previously as Brazil’s conventional seeds supply remains low, said Mendes, the conventional seed program coordinator.

Mato Grosso’s program aims to give farmers “a choice,” he said.

Monsanto’s RR and Intacta technology account for all the transgenic soy in Brazil, data sampled this season by consultant Agroconsult show.

Soy demand from China, a major factor in Brazil’s agricultural expansion, remains strong. However, a Chinese consumer backlash against GM crops is beginning to dent demand for soy oil, its main cooking oil, and could spell trouble for the crushing industry, which relies on GM soybeans from Brazil and the United States.

China, which does not grow GM soy, needs 11 million tonnes of conventional soybeans for food production per year, Lin Tan, an executive at Hopefull Grain & Oil Group, told Reuters.

Local farmers cannot supply at least 3 million tonnes of demand from crushers, he said.

“China has a market gap and the additional grains must come from somewhere,” Tan said.

A group of 14 European Union countries imported about 2.7 million tonnes of non-GM soybean meal equivalent, according to a 2015 report, and there is potential demand from India, Mendes said.

Maggi, whose family’s Amaggi is a partner in Mato Grosso’s GM-free soy program, told Reuters Brazil needs to step up research to develop conventional seeds for mass production.

“I am an enthusiast,” he said. But he cautioned that the government has no funds to promote GM-free soy production, adding there is space for both kinds in the marketplace. (Reporting by Ana Mano; Editing by Dan Grebler)