GRAINS-Rice gains as Iraq buys U.S. supplies

* Big sale of U.S. rice to Iraq lifts rice market

* Firm cash, Argentine concerns lift soy

* Egypt and Iraq snub U.S. wheat offers

* Lower equities and crude oil weigh on grains

* Dry weather keeps stirring wheat market

(Recasts to include U.S. trading session, fresh analyst quotes, changes dateline from PARIS/SEOUL)

CHICAGO, March 18 - U.S. rice futures held firm on Wednesday, boosted by news Iraq bought 120,000 tonnes from the United States, while most other grain markets stumbled as lower equities and crude oil weighed.

Iraq, one of the world's leading wheat importers, has diversified towards new origins since last summer after making major U.S. wheat purchases in past years.

"Iraq's purchase boosted rice futures. It's been talked about for about two weeks and rice had been getting pretty cheap," said Jack Scoville, analyst for The Price Futures Group.

Iraq also bought 90,000 tonnes of rice from South America but snubbed the U.S. as it bought wheat from Australia.

Egypt also bypassed the U.S. and bought Russian wheat.

"Wheat is down because Egypt bought all Russian. We didn't get any of the Iraqi or Egypt wheat business," Scoville said.

As wheat prices fell on the negative export news, corn turned down as the stock market began eroding and crude oil took a tumble.

Soy trade was choppy but strong underlying support to soy stemmed from tight soy stocks, firm cash and concerns about potential hampered export sales of soy by Argentina as the government and farmers continue to haggle over export tax policy.

At 11:23 a.m. CDT (1623 GMT), U.S. May rice was up 3-1/2 cents per cwt at $11.99 per cwt, May wheat was down 7-1/2 cents at $5.45, May soy was up 3 at $9.16-1/4 and May corn was down 3/4 cent at $3.89-3/4 per bushel.

Traders and analysts said the rice market, which soared to limit gains on Tuesday, found additional underpinning on Wednesday from the Iraqi-U.S. rice deal.

Iraq, the heart of the ancient Fertile Crescent, is struggling to overhaul a farm sector suffering from decades of isolation, underinvestment, poor irrigation and now, drought.

Soybeans found underlying support on concerns that Argentina's soy exports may be slowed because of an ongoing conflict between farmers and the government over export taxes on farm products.

Argentina is the third largest soy exporter in the world and largest exporter of soymeal and soyoil.

Wheat prices also found a bit of a cushion under the market tied to dry weather in the U.S. Plains hard red winter wheat region that could begin to trim production prospects.

"There are some showers forecast but I don't think it will be enough," Scoville said.

Corn and soybean futures continue to be buffeted as each commodity attempt to "buy" acres for the 2009 crop season.

The bulk of the U.S. corn crop will be planted from roughly early April to mid-May but the high expense associated with corn production is leading to outlooks for a big cut in corn acreage this year and a big jump in soy area.

Corn prices could rise to $5 a bushel this year, grain analysts told the Reuters Food Agricultural Summit in Chicago, with U.S. farmers expected to devote less crop acreage to corn and more to soybeans this spring.

The U.S. Department of Agriculture will release its much anticipated plantings forecast for this year's U.S. corn and soy acreage on March 31.