July 20, 2012 / 11:58 AM / 7 years ago

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

NEW YORK (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 farmer breaks open a ear of corn while surveying his crop in Mystic, Iowa, July 11, 2012. REUTERS/Adrees Latif

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. .N

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.<EIA/S>

“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.

Editing by Phil Berlowitz, Diane Craft and David Gregorio

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