KANSAS CITY, Mo. (Reuters) - A loaf of bread could soon become controversial.

From university laboratories to U.S. government-run greenhouses, research is moving forward to bring the first genetically modified (GMO) wheat to market as early as 2003.

The goals are noble -- to make wheat production more efficient and robust for farmers and to make wheat better for bakers and more nutritious for consumers.

But success may also open a new front in the global debate over the safety of genetically modified foods as biotech wheat makes its way into staples like bread, crackers and pasta.

"There is this fear of unleashing genes into the food supply and into the environment," said Jim Peterson, a wheat breeder at Oregon State University, which recently signed a deal with Monsanto Co. to develop a gene-altered wheat. "Until we can have a gene that has true consumer benefits, we are going to have some trouble with acceptance."

Wheat is the second-largest food grain grown in the world -- corn is the first -- and is the top grain traded internationally, making it subject to intense global scrutiny.

That fact, combined with a swarm of protests in the United States, Europe and Asia over fears that GMO crops might harm human health and the environment, have many in the wheat industry more than a little nervous.

GMO advocates say the technology is safe, but so far, the market is unconvinced.

"'If you grow GMO wheat, we will not want to buy it.' That's what we're hearing from our customers," U.S. Wheat Associates spokeswoman Dawn Forsythe said. "They're saying 'we see where it is helpful for your farmers, but what does it do for us, and why should we buy it?"'

Forsythe said that the top importers of U.S. wheat, including Egypt and Japan, have already said they want nothing to do with GMO wheat.

SCIENCE FACES FIERCE PROTESTS

Despite the concerns, Oregon State and three other U.S. universities have recently agreed with Monsanto, the leading player in advancing genetically modified grain varieties, to develop and bring to market a "Roundup Ready" spring wheat as early as 2003.

The deals with Oregon State, Washington State University, South Dakota State University and the University of Minnesota would bring little direct benefit to consumers, who know spring wheat mainly as the chief ingredient in bagels and rolls.

But farmers could theoretically save on production costs with the herbicide-tolerant strain.

Monsanto is also in discussions with other universities for research into different wheat classes, such as hard red winter wheat, another bread staple.

Monsanto, which has been the subject of many anti-GMO protests, became a unit of U.S.-Swedish drug firm Pharmacia Corp (PHA.N) in March. Company officials declined to discuss the issue other than to confirm that the company was currently in the research phase of developing Roundup Ready wheat.

The work in GMO wheat comes amid a global firestorm of controversy that is complicating efforts to promote modified corn, a quarter of the U.S. crop, and soybeans, which make up more than half of the soybeans that American farmers produce.

Protesters have vandalized and burned biotech university laboratories in the United States, started a riot at an international biotechnology industry meeting in Italy, and ambushed a U.S. cargo ship in Wales carrying genetically modified soybeans.

In addition to fears of damage to health and environment, some GMO opponents also say companies pushing the technology want to control the food supply.

WHEAT FARMERS WORRY

Similar opposition could be lying in wait for wheat, a crop that amounted to $3.7 billion in U.S. exports last year and is one of the United States' top agricultural export products.

And all of the controversy has wheat farmers in a bind. GMO wheat could help boost their bottom line, or it could leave them with bins full of unmarketable grain.

"Wheat farmers would like to embrace the technology but they also are concerned about their export markets, which account for 50 percent of total U.S. wheat production," said Darrell Hanavan, head of a biotech committee of the National Association of Wheat Growers and U.S. Wheat Associates.

"Farmers are asking 'Is it going to be accepted?' We don't know the answer to that," Hanavan said.

Many in the wheat industry are working on strategies for segregation so U.S. wheat customers won't have to worry about GM0 wheat mixed in with non-GM0 wheat. But no clear plan has been defined yet.

Meanwhile, a growing sentiment says the solution to market acceptance is likely to be found in products that directly benefit consumers, rather than farmers or large corporations.

As far as wheat goes, that day is a long way off, according to Ann Blechl, a geneticist with the Agricultural Research Service of the U.S. Agriculture Department.

Blechl is now working on GMO traits to give consumers wheat with improved protein for bread and pasta, eliminating the nutritional need for meat and bean proteins, as well as wheat with better baking characteristics.

"In the present political climate I don't know how close we'll ever get to bringing these things to market," she said.

University of Minnesota wheat breeder Jim Anderson, one of those working on the new GMO spring wheat, is also less than optimistic: "I don't know that anybody wants to be first with this, and have to test the waters."