Beef exports to South Korea, New Zealand's second-biggest market, are at risk after the discovery of chemical contamination.

Meat tainted with the insecticide endosulfan has prompted an urgent investigation by the New Zealand Food Safety Authority (NZFSA) after a complaint from its South Korean counterpart.

The revelation is likely to be a blow to the industry, which was enjoying a boost in sales in the South Korean market amid a ban on beef from the United States over mad-cow fears.

The reputation of New Zealand beef suffered in 2005 when the misuse of endosulfan on cattle on a single farm led to a recall in the South Korean and Taiwanese markets, costing millions of dollars.

New Zealand beef exports are worth about $1.8 billion, according to Statistics New Zealand. Last year, South Korea was the second-largest market after the United States, at $256 million.

Japan and Taiwan are the third and fourth-biggest markets for Kiwi beef.

"They discovered it and we are now investigating it. They have some confidence in our system because we act quickly," Minister of Agriculture Jim Anderton told The Press.

"It is not in quantities that are health-threatening for human consumption. Nevertheless, it's a concern and the Food Safety Authority is investigating it."

Anderton declined to say if South Korean authorities had threatened a ban or a recall but confirmed leaks to The Press that the contamination had been traced to a Waikato farm.

"It is always a worry when you've got some contaminant that other countries see as a danger, and we would acknowledge that," he said.

"We wouldn't approve it, so if it is getting into meat it is a worry and action is being taken as we speak."

The Environmental Risk Management Authority (Erma) this month issued a preliminary decision to allow continued endosulfan use on plants in a move that angered the Green Party.

Public submissions on the preliminary decision close on August 8.

The insecticide, widely used on vegetables, berry fruit and citrus and on sports grounds to control earthworms, is banned in more than 50 countries. The accepted international level for meat fat is 0.1 parts per million.

The 2005 incident that led to the recall from South Korea and Taiwan was the result of a Northland farmer spraying the chemical on cattle to kill ticks. He was fined $15,000.

New Zealand and Australian beef exports to South Korea have benefited over recent months from a ban on US beef. That ban was lifted last month.

NZFSA senior programme manager for market access Neil McLeod said yesterday that, while the situation was serious, it was too early to determine the scale of the problem.

"We are treating it seriously and getting on with it pretty damn quickly," he said. "It does not seem to be the same response in Korea this time as last, but we can't be absolutely sure of that."

McLeod said South Korea's National Veterinary Research and Quarantine Service had reported traces of endosulfan in a single 26kg carton of meat from a particular processor.