UPDATE 1-Tesco drops Irish beef baron's firm over horsemeat row

* Tesco drops supplier of burgers containing horsemeat

* Says to use DNA testing to avoid repeat of scandal

* Move a blow to Ireland's $2.6 bln beef industry

By James Davey and Stephen Mangan

LONDON/DUBLIN, Jan 30 (Reuters) - Tesco fired a supplier controlled by Ireland's most powerful beef baron on Wednesday for selling it burgers containing horsemeat and promised to use DNA testing equipment to check the content of products on its shelves.

The world's No. 3 retailer, Tesco is reeling from a wave of bad publicity after the Irish food safety authority discovered that 29 percent of a frozen beef burger was horsemeat.

The move, which comes days after a similar move by Burger King, is a blow to Ireland's 2 billion euro ($2.6 billion) beef industry, which had hoped that the discovery the horsemeat came from Poland might limit the fallout.

"We took that decision with regret but the breach of trust is simply too great," said Tesco technical director Tim Smith said in a statement announcing the termination of its contract with Silvercrest, a subsidiary of Larry Goodman's ABP Foods.

ABP, Europe's largest beef exporter, tried to deflect blame for the scandal this week after the Irish government announced it had traced the source of the meat to a Polish supplier.

ABP said it had "never knowingly purchased or traded in equine product" but Tesco said it had failed to use meat from a list of approved suppliers and to honour an instruction to source ingredients exclusively in the UK and Ireland.

The damage to Ireland's reputation as a supplier could be hard to shake, analysts said.

"It's a spectacular own-goal for Ireland because it reflects on the beef industry as a whole," said Patrick Wall, lecturer in public health at University College Dublin. "A team is only as strong as its weakest player."

The scandal has revived memories of a government-appointed tribunal in the 1990s finding abuses of European Union beef subsidies at plants Goodman controlled.

The tribunal found that counterfeit stamps had been used in some cases to pass off beef carcases as being of higher quality at some plants controlled Goodman, although it said Goodman himself may not have been aware of the abuse.

Goodman, who declined a request for an interview, has dismissed the tribunal's report as biased.

A well-known figure in Irish business, he has tried to keep a low profile since his ties to prime minister Charles Haughey in the 1980s came close to bringing down the government.

He used ABP to rebuild his empire, which collapsed after a number of disastrous investments in the 1980s and the 1990 Iraqi invasion of Kuwait which left Saddam Hussein's government unable to pay a 170 million pound ($268 million) bill.

The Tesco contract - worth 15 million euros, according to Tesco Ireland - was a small part of ABP's business.

Tesco said it would continue to buy Irish beef worth more than 100 million euros per year from other ABP companies.