Egypt says Dubai trader failed to deliver on contracted wheat shipments

* Two cargoes have yet to arrive in Egypt - minister

* Trader AOS declines to comment

* AOS is a leading supplier of wheat to Egypt

DUBAI/CAIRO, May 23 (Reuters) - Dubai-based trader AOS, a leading supplier of wheat to Egypt, has failed to deliver two of its cargoes, Supply Minister Ali Moselhy told Reuters.

Moselhy, who is also chairman of Egypt’s state grain buyer, the General Authority for Supply Commodities (GASC), said AOS had been offered two extensions for the delayed cargoes of about 120,000 tonnes of wheat but still failed to supply them.

AOS declined to comment when contacted by Reuters.

“They (AOS) have failed to deliver two cargoes, there were delays and we arranged new timings for them ... but they did not execute,” Moselhy said. “They are now outside of their contractual terms (with GASC).”

He declined to provide details of the cargoes, including country of origin, and did not specify their value.

Egypt baffled grain traders last week by holding an international purchase tender for wheat, in which GASC bought 60,000 tonnes despite a plentiful local harvest that would normally mark a pause in imports until around July.

The tender raised questions over why Egypt, the world’s largest wheat buyer, needed to buy cargoes at a time of high prices as the season for Black Sea wheat neared its close.

The missing AOS cargoes could force Egypt to tap global markets sooner than expected to maintain reserves of the grain, which the government considers politically sensitive for its role in supplying the country’s bread subsidy programme.

Egypt has operated a massive bread subsidy system since the 1960s, which no Egyptian leader has been able to modify due to fears of unrest like the 1977 bread riots.

AOS Chairman Mohamed al-Naqbi said last November that the trader supplies Egypt with about 20 percent of the country’s annual grain needs, including 700,000 tonnes of wheat to GASC and 1.7 million tonnes to the private market.

The Egyptian government spends about $1.5 billion annually on state wheat imports. (Additional reporting by Momen Saeed Atallah; Editing by Veronica Brown and Dale Hudson)