* Dry weather drives investor buying, lifts fiber

* Some 9 pct of U.S. crop in very poor condition -USDA

* July ICE contract expires at 2.08-cent discount to Dec

NEW YORK, July 9 (Reuters) - Cotton futures rose to a 2-1/2-week high on Tuesday in sympathy with grains markets as concern over the quality of crops in the United States underpinned prices.

The benchmark December cotton contract on ICE Futures U.S. closed up 0.65 cent, or 0.8 percent, to settle at 85.98 cents per lb.

Prices touched 86.23 cents a lb, the third-month contract's highest price since June 20, as a rise in the grains markets and investor buying for a second straight session boosted fiber prices.

Worries that hot and dry weather would damage crops in the United States drove the gains, though the day's gains were limited by strong resistance at 86 cents a lb and subdued mill buying.

"The grains are reinvigorated by some hot temperatures and the Texas crop remains in bad condition. The domestic situation is bullish enough for cotton to rally a little bit," said Keith Brown, president of commodity firm Keith Brown and Co in Moultrie, Georgia.

Worries that prolonged dry weather could reduce output in Texas, the top producing state, were affirmed by a weekly U.S. government crop progress report released after the market closed on Monday that showed more of this year's cotton crop is in very poor condition compared with the previous two years.

Dealers eyed the U.S. Department of Agriculture's monthly crop report on Thursday for an updated forecast projections of U.S. supplies in 2013/14 and for global consumption for the current crop year.

Strong demand from China has underpinned cotton prices throughout the 2012/13 crop year that ends July 31.

The U.S. outlook has grown more bullish, but the outlook for the global balance sheet is not so clear. Record global stocks are expected continue to grow as China builds its strategic reserves, as supplies outside the top textile market have been seen tightening.

The July ICE contract settled up 0.07 cent, or 0.08 percent, at 83.90 cents a lb, leaving it at a discount of 2.08 cents a lb to the most-active December cotton in its final day of trade.

Certified stocks totaled about 611,000 bales, according to the most recent ICE data, down from recent highs but still at some of the highest levels in three years. (Reporting by Chris Prentice; Editing by Diane Craft)