The department of agriculture and the environmental protection agency are encountering growing disquiet from a coalition of farmers and food manufacturers about the potential dangers of the next phase of GM products - "biopharming", or the implanting of genes in food crops to grow drugs and industrial chemicals.

The idea of tightening regulations on GM products represents something of a revolution in thinking in the US, where about 70% of the processed food on supermarket shelves contains genetically engineered ingredients.

But concerns have arisen after a small biotech firm in Texas was fined $3m (£2m) for tainting half a million bushels of soya bean with a trial vaccine used to prevent stomach upsets in piglets.

Under a settlement reached this month, the first of its kind against any biotech company in the US, a firm called Prodigene agreed to pay a fine of $250,000 and to repay the government for the cost of incinerating the soya bean that had been contaminated with genetically altered corn.

US authorities said the corn did not reach food crops or animal feed. But the episode has drawn unwelcome attention to an as yet experimental area of GM farming.

The premise behind biopharming, or "pharming" for short, is that genetic tinkering can turn an ordinary-looking corn or barley field into a potential drug factory, producing insulin, chemotherapy drugs, and other products for much less than it would cost to set up an industrial plant.

At present, two dozen trials of the experimental GM drugs are under way across the US.

The biotech firms argue that the new technique can revolutionise health care, especially in the developing world where hospitals short on syringes can dispense edible drugs. But in the wake of the Texas case, questions are being asked.

The latest incident was the worst violation so far of regulations intended to keep biopharming out of the food supply. It was also seen as the most serious setback to date to the next generation of GM farming.

Until now, genetic engineering has been used mainly to make crops such as corn and soya bean resistant to insects and disease, and the US food industry has been solidly on side.

The Texas alarm has begun to change that. "The incident overall just reaffirms our concerns that something could go wrong," Stephanie Childs of the Grocery Manufacturers of America, which represents food companies such as Kellogg and General Mills, told the Los Angeles Times.

Analysts in Washington said yesterday that they expected the department of agriculture to impose more stringent guidelines next year. Published reports said yesterday that guidelines under consideration by the authorities include moving experimental farms away from America's grain belt in the mid-west, or requiring growers to dye the leaves of the altered crops.

The agriculture department's disciplinary measures against the small Texas firm have crystallised concerns among farmers, environmentalists and industry about the risks of experimental vaccine crops getting into the food supply.

"The department of agriculture wanted to send a signal that the companies need to take the obligation to protect the food supply very seriously," Michael Rodemeyer, the director of Washington's Pew Initiative on Food and Biotechnology, said yesterday.

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