* Egypt to give cash subsidy directly to wheat farmers

* Old subsidy system offered prices higher than global market

* High prices led to chronic smuggling

(Adds details, background)

CAIRO, Nov 5 (Reuters) - Egypt will start buying local wheat from farmers at the average global price starting next season changing the way it subsidises its wheat growers, the cabinet said in a statement on Thursday.

In previous years Egypt annually fixed a local procurement price for Egyptian wheat that is above global prices in an attempt to encourage farmers to grow the crop.

But the high price has led to smuggling, in which foreign wheat, mostly Russian, is sold to the government, falsely labelled as Egyptian.

Under the new system, the government will directly subsidise wheat farmers by granting each of them 1,300 Egyptian pounds ($161.89) per feddan at a maximum of 25 feddans per farmer, the statement said. One feddan is equal to around one acre.

Supplies minister Khaled Hanafi told Reuters in a July interview that a new subsidy system was being studied for introduction in 2016.

In the 2015 season, Egypt offered a fixed price of 420 pounds per ardeb, which is equivalent to about 150 kg. The price was about $168 a tonne to $200 a tonne higher than the international market.

A record 5.3 million tonnes was subsequently purchased from local farmers, up from 3.7 million tonnes in 2013-14, amid evidence of smuggling. Traders say as much as 1 million tonnes of that could be foreign wheat but the supplies ministry has repeatedly denied the claim.

Egypt will continue to subsidise sugar farmers at 400 Egyptian pounds per tonne, the statement said.

($1 = 8.0300 Egyptian pounds)

(Reporting by Eric Knecht; Writing By Maha El Dahan; Editing by Mark Potter and Susan Thomas) ((Eric.Knecht@thomsonreuters.com; +20 2 23948181; Reuters Messaging: eric.knecht@thomsonreuters.com@reuters.net))