The Indiana State Department of Agriculture announced the approval on Thursday, saying the move would give farmers more flexibility in feeding livestock at a time of limited feed supplies.

Iowa, Illinois and Nebraska, the top three U.S. corn states, have already received similar authority from the FDA to blend off corn with aflatoxin.

Aflatoxin is the byproduct of a corn mold that tends to spread in drought years. Following the worst drought in the Corn Belt in half a century, the grain sector has been bracing for outbreaks of the substance, which can cause liver disease and is considered carcinogenic.

Human exposure to high amounts of aflatoxin is rare. But aflatoxin contamination prompted a series of U.S. pet food and livestock food recalls last December.

The FDA generally forbids grain handlers from mixing corn containing aflatoxin with "clean" grain, but it has relaxed this policy during years of widespread aflatoxin problems upon the request of state officials.

Following FDA approval, grain handlers who want to blend corn contaminated with aflatoxin must agree to comply with several provisions, including labeling the blended grain.

Under FDA guidelines, certain types of animal feed can contain an aflatoxin concentration of up to 300 parts per billion (ppb). Human foods must contain less than 20 ppb, while the threshold for milk is even lower at 0.5 ppb.

Last month, Iowa began requiring the state's dairy processors to test all milk received in the state for aflatoxin.

Indiana's State Board of Animal Health advised Indiana dairy plants to test incoming milk for aflatoxin starting September 1, but the testing is not mandatory.

(Reporting by Julie Ingwersen; editing by Jim Marshall)

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