COMMODITIES-Corn, soy hit record highs; oil jumps on Mideast worry

* Rally in grains revive fears of 2008 food crisis

* Oil up 7th day on potential Mideast supply disruptions

By Barani Krishnan

NEW YORK, July 19 (Reuters) - Corn and soybeans hit all-time
highs on Thursday as the worsening drought in the U.S. farm belt
stirred fears of a food crisis, while crude oil prices rose to
eight-week peaks on worsening tensions in the Middle East.

A rally on Wall Street also supported oil and other
industrial commodities, including copper. U.S. stocks hit 2-1/2
year highs on robust second-quarter earnings reports.

Markets got a further boost from bets for a new U.S.
stimulus after a slew of soft data pointed to a slowing recovery
in the world's largest economy.

Data showed claims for U.S. jobless benefits rose last week
while factory activity in the Mid-Atlantic region contracted for
a third straight month and home resales fell.

"Bad data is good when it comes to stimulus hopes," said
Phil Flynn, analyst at Price Futures Group in Chicago.

Front-month corn futures, traded in Chicago, hit a
record high of $8.16-3/4 a bushel before settling at $8.07-3/4
, up 1.6 percent, as the worst U.S. drought in 56 years
expanded.

The spot contract for soybeans closed up 3 percent at
$17.33-3/4 per bushel, after posting a record high of $17.49
. Wheat finished up nearly 4 percent at $9.35,
peaking at a session high $9.38, the highest in nearly 4
years.

"I hesitate to use those words (food crisis) but the
circumstances are more severe now than they were in 2008," said
Dennis Gartman, a commodity trader and editor/publisher of The
Gartman Letter.

Others said the current environment for food prices is more
benign than it was in 2008, when crude oil cost about 50 percent
more, adding pressure to household incomes.

Although there are no signs of an end to the near two-month
long rally in grains, high prices were starting to dent corn
sales, some traders said.

Government data showed sales of U.S. soybeans to overseas
buyers fell to the lowest level in six months last week.

In corn, weekly sales to importers were one-fifth of a year
ago, with Taiwan choosing to cancel a large purchase.

Oil prices hit an eight-week high as tensions in the Middle
East -- which provides a quarter of the world's oil --
reinforced concern about potential supply disruptions.

Wednesday's attack that claimed the lives of top officials
in Syrian President Bashar al-Assad's inner circle and the
Bulgarian bus bombing that killed Israeli tourists -- an act
Israel blamed on Iran -- strengthened fears that shipments of
crude could be disrupted.

Analysts said geopolitical concerns outweighed the latest
U.S. Department of Energy supply report, which showed crude
inventories in the world's top consumer fell less than expected
last week.

"Overall, we are more concerned about the latest bombings in
Syria and Bulgaria than about the DOE statistics," said Olivier
Jakob, analyst at Petromatrix, in a report.

U.S. crude's front-month contract settled up $2.79 at
$92.66 a barrel after touching an eight week high of $92.90.

London's benchmark Brent crude jumped $2.64 to
settle at $107.80 a barrel.
Prices at 3:39 p.m. EDT (1939 GMT)

LAST/ NET PCT YTD

CLOSE CHG CHG CHG
US crude 92.52 2.65 3.0% -6.4%
Brent crude 107.81 2.65 2.5% 0.4%
Natural gas 2.999 0.026 0.9% 0.3%

US gold 1581.50 9.60 0.6% 0.9%
Gold 1580.51 8.51 0.5% 1.1%
US Copper 353.45 6.05 1.7% 2.9%

Dollar 82.923 -0.147 -0.2% 3.4%
CRB 304.970 5.890 2.0% -0.1%

US corn 770.50 -12.75 -1.6% 19.2%
US soybeans 1652.25 32.25 2.0% 37.9%
US wheat 913.50 -3.00 -0.3% 39.9%

US Coffee 188.95 6.80 3.7% -17.2%
US Cocoa 2230.00 26.00 1.2% 5.7%
US Sugar 23.20 0.14 0.6% -0.1%

US silver 27.217 0.122 0.5% -2.5%
US platinum 1422.10 18.90 1.3% 1.2%
US palladium 584.85 7.30 1.3% -10.9%

(Editing by Phil Berlowitz, Diane Craft and David Gregorio)