By Irwin Arieff

UNITED NATIONS, Dec 2 (Reuters) - Iraqis have begun farming at a shut-down chemical weapons plant where thousands of tonnes of hazardous compounds were once produced, stored or destroyed, U.N. weapons inspectors warned on Friday.

"There may well be health, safety and security hazards associated with the agricultural activities," the U.N. Monitoring, Verification and Inspection Commission, or UNMOVIC, said in its latest report on weapons of mass destruction activities inside Iraq.

Recent satellite images are showing signs of "agricultural activity" inside the perimeter of the former Muthanna State Establishment, Iraq's primary chemical weapons research, development and production facility from 1983 until 1991, the inspectors said in a report to the U.N. Security Council.

The signs of farming were observed just 500 yards (metres) from bunkers where the deadly chemical warfare agent sarin and nearly 200 tonnes of arsenic and cyanide compounds had been stored under U.N. seal before the U.S.-led invasion of Iraq in 2003.

U.S. arms experts later reported that some of those bunkers had been breached and some of their contents looted after the war began, the commission said.

The 3-mile-square (5 km-by-5 km) plant, located about 40 miles (70 km) northwest of Baghdad, near Samarra, produced thousands of tonnes of often-deadly chemical agents including mustard gas, sarin, tabun and VX before the first Gulf War in 1991.

After that war, the site was used to destroy most of Iraq's chemical weapons under the supervision of U.N. arms experts.

Previously, all agricultural activity in the area had been outside the site's perimeter, the commission said.

UNMOVIC left Iraq just before the 2003 invasion, and the United States prevented its inspectors from returning after the war. But the agency lives on with a $12 million annual budget paid for with Iraqi oil money.

While Iraq and the Security Council discuss its future, it has continued to study satellite images to determine the extent of widespread looting of Iraqi weapons sites sealed by its inspectors before the war.