(Adds comments, South Korea corn offer spurned)

By Jon Herskovitz

SEOUL, June 30 (Reuters) - The U.N. World Food Programme, which has warned of a humanitarian crisis in North Korea due to a food shortage, said on Monday it reached a deal with Pyongyang to rapidly expand aid, and that a U.S. ship carrying wheat had arrived.

Flooding last year, higher commodity prices and political wrangling with major donor South Korea have pushed North Korea to a food shortfall similar to ones it faced about a decade ago when famine killed an estimated 1 million people, experts have said.

The World Food Programme (WFP) said the agreement it reached with the North will allow it to expand its operation, previously aimed at feeding 1.2 million people, to feed more than 5 million in the country of about 23 million.

"It will make all the difference in the world to those 3 or 4 million or people who are now going to get food aid who were not getting it before and didn't have enough to eat," said Tony Banbury, WFP Asia regional director.

North Korea also allowed the WFP to place more international aid workers on the ground and expand its operations to a greater number of counties in the impoverished country. The WFP estimates as many as 6 million North Koreans need food aid.

The aid deal and arrival of U.S. help come days after North Korea made a symbolic commitment to an international disarmament pact by blowing up the cooling tower at its plutonium-producing nuclear plant, and provided documents on its nuclear programmes.

The United States said in May it would provide 500,000 tonnes of food to North Korea in a sign of improving cooperation. Washington will supply 400,000 tonnes via the WFP while U.S. non-governmental organisations will distribute 100,000 tonnes.

The WFP said the first U.S. ship carrying aid arrived on Sunday in Nampo, a port that serves Pyongyang, with a cargo of 37,000 tonnes of wheat.

U.S. policy is not to use food as a weapon or a reward.

The U.N. Food and Agriculture Organisation said in late March it expects North Korea to have a shortfall of about 1.66 million tonnes in cereals for the year ending in October 2008, the largest deficit in about seven years.

South Korea usually sends about 400,000 tonnes of rice and a hefty amount of fertiliser a year to North Korea but has not sent the aid this year as ties soured between the two when President Lee Myung-bak took office in February and promised a tough line toward Pyongyang.

North Korea has branded conservative Lee "a traitor to the nation" over his calls to restrict the free flow of aid the North had seen under his liberal predecessors and to tie handouts to how well the North lives up to the nuclear deal.

North Korea has rejected an offer from the Lee government to provide 50,000 tonnes of corn aid pledged to Pyongyang under Lee's predecessor, the South's Unification Ministry said on Monday. Lee has said he would provide help if requested by the North.

The WFP's Banbury said by telephone from Bangkok that the North's harvest this year is likely to be hit by the lack of fertiliser.

The WFP is taking part in a survey on food and nutrition in North Korea, with results expected in mid-July. Early findings paint a bleak picture.

"The situation is dire for millions of people in the country," Banbury said. (Additional reporting by Jack Kim; Editing by Jonathan Hopfner and Jerry Norton)

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