By Maha El Dahan

ABU DHABI (Reuters) - Egyptian state inspectors have rejected a 63,000 tonne shipment of wheat at its Romanian port of origin after checking for ergot, the first time Egypt has rejected a cargo at source since taking a zero tolerance stance against the common grain fungus.

Egypt, the world's largest wheat importer, last week reinstated its hard-line stance despite the policy having made grain purchases difficult earlier this year.

Traders said the latest development at the Romanian port of Constanta would further limit the purchasing power of the state grain buyer GASC.

The Romanian shipment was headed for GASC. Previous shipments rejected had been inspected in Egypt and were all purchased by the private sector except for a French wheat shipment sold to GASC by Bunge that was rejected in December.

No one was available for immediate comment at GASC.

Ergot, a common grains fungus that can cause hallucinations when consumed in large amounts, is considered harmless in low quantities and more common international standards allow a 0.05 percent ergot tolerance level in wheat imports.

Egypt's decision to refuse ergot in wheat imports has halted state grain purchase tenders, raised prices and been the subject of debate between and within ministries which have sometimes undertaken different policies.

Egypt's state wheat import purchasing agency GASC had previously sought a 0.05 percent tolerance level for ergot. It reversed to a zero tolerance policy ahead of a tender on Aug. 31 and was subsequently forced to cancel after a near complete boycott by suppliers. 

On Monday, the health ministry also issued a decree stipulating zero tolerance bringing all three ministries that oversee the policy - supply, health and agriculture - in line for the first time and leaving little room for the state grain buyer to relax the rules if need be.

Traders said they were greatly concerned about the shipment rejection in Romania.

"This is a catastrophe," one Cairo based trader said. "They are giving everyone problems at the moment at ports of origin. There is a problem with Russian wheat at Novorossiysk and with another Romanian shipment as well."

The Egyptian Agriculture Ministry spokesman did not immediately reply to requests for comment.

"This will be a disaster for traders who sold on the condition that they will supply wheat with an ergot tolerance level, there is great concern in the market," a German trader said.

"Traders trying to supply on the basis of a contract signed with an ergot tolerance level face a rejection of their shipments anyway and big financial losses. I doubt if Egypt will be able to import wheat in large volumes in the present confusion," the trader said.

(Reporting by Maha El Dahan, additional reporting by Michael Hogan in Hamburg, Eric Knecht in Cairo and Polina Devitt in Moscow, editing by Elaine Hardcastle)