(Adds details from paper, updates report on causes)

CAIRO, June 7 (Reuters) - Thousands of Egyptian demonstrators clashed with police to protest a decision by local authorities to end distribution of flour rations in the northern coastal town of Burullus, security sources said.

The state-owned al-Ahram newspaper said around 8,000 protestors sealed off a road for seven hours, using burning tyres to stop traffic.

Police used teargas and batons to disperse the crowds and three protesters were hospitalised after inhaling teargas, security sources said. Police made 30 arrests, according to al-Ahram.

One security source said rubber bullets had been fired at the crowd.

Security sources said earlier the protests were caused by bread shortages, but subsequent reports said the protestors, primarily local fisherman, were angered by the local authority's decision to end direct distribution of flour rations in favour of supplying bakeries with the flour.

High wheat prices have put great strain on Egypt's bread subsidy system, where the urban poor depend on cheap bread to survive.

The demand for subsidised bread has grown and the heavy subsidy has increased the incentive to divert subsidised flour illegally to other uses.

Egypt said in May it would add at least 17 million people to the ranks of ration card holders to ease the effect of rising food prices. (Writing by Aziz El-Kaissouni, editing by Mary Gabriel)

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