UPDATE 1-Iraq makes no purchase after talks on U.S. wheat and rice

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DUBAI/HAMBURG, March 12 (Reuters) - Iraq's trade ministry failed to seal a deal for U.S.-origin rice and wheat, in what would have been its second direct purchase outside the formal tender process in less than a year, because prices were too high, trade sources said on Monday.

Iraq's cabinet authorized the ministry of trade last May to make direct purchases of wheat and rice to guarantee food security.

In recent talks with the United States, Iraq had sought to buy at least 30,000 tonnes of U.S.-origin long grain rice and 50,000 tonnes of U.S. wheat, trade sources said.

ADM made offers for 30,000 tonnes of rice at $759 a tonne cost, insurance and freight and 50,000 tonnes of wheat at $348.59 a tonne CIF, but the trade ministry viewed the prices to be too high, the sources said.

"The Trade Ministry is free to have talks with all wheat suppliers and it is normal to switch to other alternates in case we were offered higher than acceptable wheat prices," one trade ministry source, who declined to be named, told Reuters.

In November, Iraq bought 500,000 tonnes of wheat and 90,000 tonnes of rice of U.S. origin in direct deals outside the tender process after signing a memorandum of understanding with the United States late last year for the supply of grains.

The rice was purchased from ADM and the wheat from Cargill, ADM and an unnamed third firm.

On Sunday Iraq announced an international purchase tender for at least 50,000 tonnes of wheat of U.S., Australian and Canadian origin.

"The U.S. invite has fallen through and that's why they issued a new global tender," one Middle East trading source said.

The Middle East buyer had been struggling to import the grains for its food subsidy program after introducing new payment and quality terms that kept traders away from its international tenders earlier this year.

"U.S. origins are not the cheapest at the moment and a direct deal with the U.S. would have been more expensive than a tender including several origins," one European trader said. (Reporting by Maha El Dahan and Michael Hogan, editing by Louise Heavens and Susan Fenton)