"Because this pesticide is dangerous, we have temporarily aborted the retrieval operations at the ship," he said.
The Princess of the Stars ferry had more than 800 people on board when it went down – only 56 survivors have been found.
More than 100 bodies have do far been recovered, but many more are believed trapped in the upturned ship.
Divers from the Philippines navy and coast guard as well as the US navy have been retrieving bodies from the ship.
|Hundreds of vicitims are thought to be still trapped in the hull [EPA]
Authorities are launching legal proceedings against the ferry's operator for not declaring the cargo.
Officials have warned against eating fish caught in the area of the sunken ferry until tests show they have not been contaminated.
Vice Admiral Wilfredo Tamayo, head of the Philippine coast guard, said a salvage company was being consulted on possibly righting the seven-story ship to speed up recovery work.
He said the coast guard will consult Philippine officials and the US navy on the possible assistance of its salvage ship USNS Safeguard.