Corn, soy jump on China tax cut talk; oil steady

* Grains surge on talk of lower Chinese taxes on food

* Oil steady on Middle East risk worries

* Cotton at record above $2 per lb; gold, coffee up too

By Barani Krishnan

NEW YORK, Feb 17 (Reuters) - Corn and soybeans jumped on Thursday, as talk that China may lower food import taxes helped agricultural markets rebound from this week's steep decline, while oil stayed firm on political risks in the Middle East.

The 19-commodity Reuters-Jefferies CRB index rose nearly 1 percent by 1:45 p.m EST (1845 GMT) on broad strength in markets like gold, coffee and cotton -- which hit highs above $2 lb for the first time in history.

Sugar was the only notable commodity that went the other way -- losing more than 1 percent a day after it rose 3 percent for its largest gain in two weeks.

Soybean and corn futures rose sharply on the Chicago Board of Trade after news that China was considering cutting import taxes on food. Wheat posted milder gains, helped also by strong weekly U.S. export sales.

"Gains here today exceeded early market expectations," said Rich Feltes, vice president of research for R.J. O'Brien.

"Today is about China potentially taking down its import tariff ... In my view, this action is addressing the Chinese food inflation problem head-on. It's a real solution, as opposed to a phony solution such as investigating speculators or capping edible oil prices."

China's Ministry of Commerce has asked other ministries to consider potential cuts in import taxes on a range of goods including food, two sources said.

Details of the cuts were unclear, but influential trading firm JCI cited a trader in Singapore as saying China may cut the soybean import tax to 1 percent, from 3 percent, and the soyoil import tax to 5 percent, from 9 percent.

If confirmed, such cuts would boost Chinese soy-crushing margins, Feltes noted.

On the CBOT, March soybeans were up more than 2.5 percent to just above $14 per bushel. The market rebounded after fund selling pushed prices off last week's 29-month high above $14.55.

March corn gained 3 percent to above $7.10 a bushel and March wheat rose 1 percent to above $8.53. As with soybeans, corn and wheat rallied after profit-taking earlier in the week had knocked both markets from their highest levels since 2008.

In oil, U.S. crude futures rose 28 cents to $85.27 a barrel as unrest in North Africa and the Middle East and Israel-Iran tensions kept the potential for supply disruption in focus.

London's Brent crude seesawed at around $103 a barrel, near Wednesday's 2-1/2 year peak above $104, its highest price since September 2008.

U.S. cotton futures rallied to $2.04 a lb, up 3.6 percent, as mills rushed to fix prices ahead of the expiry of the market's current front-month contract and before a holiday next week.

Benchmark U.S. cotton for March rose the daily 7 cent limit as traders realized delivery notices for the contract will be issued on Friday afternoon ahead of Monday's President's Day holiday in the United States.

(Source: http://www.forexyard.com/en/news/COMMODITIES-Corn-soy-jump-on-China-tax-cut-talk-oil-steady-2011-02-17T190904Z)