CAIRO, June 14 (Reuters) - The first phase of a food security system designed to preserve locally harvested wheat is expected to save Egypt $200 million annually, the chief executive of the company designing it told Reuters on Sunday.

Blumberg Grain, a family-owned firm specialising in food storage systems in emerging markets, signed a $28 million contract with the Egyptian supplies ministry last December to modernise wheat storage at 93 sites across Egypt.

The first phase of the project will modernise 105 of the once open-air storage pits used for grain storage in Egypt, with "state-of-the-art" warehousing systems.

Each modernised warehouse system will see a reduction of post-harvest losses to less than 5 percent, down from an excess of 40 percent of production, David Blumberg, Chief Executive of Blumberg Grain, Middle East and Africa, told Reuters.

A second phase of the project involve the modernisation of a further 207 of the open-air pits.

The advanced technology "will allow for screening, drying, cleaning, grading and bagging of wheat", a statement from Blumberg Grain and the supplies ministry said.

"This will enable a processing capacity of 3.7 million metric tonnes of wheat per year and create 750,000 metric tonnes of static storage capacity."

Farmers have long complained that much of their crop is lost after they deliver it to the government's "shewan" -- open-air plots of land on roadsides protected by nothing but barbed wire.

Birds eat the grain, and then corrupt local officials mix the wheat with rocks to make up for the losses.

(Reporting by Ahmed Aboulenein; Editing by Yara Bayoumy and Gareth Jones)