GRAINS-Soybeans rise on South America weather worries

* Weather models offer mixed outlook for dry Argentina

* Exporters sell U.S. soybeans to top importer China

* Wheat futures pull back after rising on Friday

(Recasts with U.S. trading, adds analysts' comments, changes dateline/byline)

CHICAGO, Jan 28 (Reuters) - U.S. soybean futures edged higher on Monday as traders worried dry weather will trim output in Argentina, the top exporter of soy products.

All eyes are on weather models as Argentina and Brazil need to produce large crops to meet strong demand for soybeans from top importer China.

Traders broadly expect large harvests in South America in the coming months, but every twist in the weather is being scrutinised amid tight global supplies.

"New conflicting models out for South America have the markets looking for direction," said Joe Davis, vice president for commodity sales at Futures International.

At the Chicago Board of Trade, March soybeans rose 0.3 percent to $14.45 a bushel by 9:45 a.m. CST (1545 GMT).

March wheat lost 0.3 percent at $7.74 a bushel, and March corn gained 0.5 percent to $7.24-1/4 a bushel.

Dry weather is a concern for farmers in Argentina, with only light rains seen for crop regions later this week, said John Dee, meteorologist for Global Weather Monitoring. Dryness is beginning to cause some worries in southern Brazil but is a bigger threat in Argentina, he said.

Soy prices could jump further if rains fail to fall, traders said.

"Until that forecast breaks one way or another, you're going to see two-sided trading primarily," Jim Gerlach, president of A/C Trading, said of Argentina's weather.

Private exporters struck deals to sell 220,000 tonnes of U.S. soybeans to China for delivery in the next marketing year, the U.S. Agriculture Department said. The sales failed to spark a rally because they are not for near-term delivery, Gerlach said.

BRAZILIAN BOTTLENECK

Soybean futures were underpinned by firm cash prices and talk that China will need to source higher volumes from the United States in the near term as infrastructure bottlenecks delay shipments from Brazil.

Brazil is forecast to surpass the United States as the No. 1 exporter and producer of soybeans this season, with a record 85-million-tonne crop that has already begun to be harvested in top soy-growing state Mato Grosso.

Big trading houses are dispatching an armada of ships to Brazil, hoping for a good spot in line to load up the record soybean crop.

Brazil's crop is 30 percent bigger than last year's, which is good news for big importers of soy, such as China. However, the South American farming giant added no new capacity to its ports.

WHEAT RETREAT

Wheat futures slipped on profit-taking after rising 1 percent on Friday on better-than-expected U.S. exports last week.

"Wheat exports sales data was impressive and there are issues with the crop in the United States because of dry weather," said Ker Chung Yang, senior investment analyst at Phillip Futures in Singapore.

Large overseas harvests are expected to compensate for lagging production in the U.S. Plains.

The front-month CBOT wheat contract is expected to end 2013 at $6.80 a bushel, down from the closing price of $7.78 at the end of 2012, according to the average estimate in a Reuters survey of analysts and traders.

Analysts see Chicago corn prices falling by 22 percent to under $5.50 per bushel by year's end and soybeans by 17 percent to $11.83 per bushel as world supplies are projected to recover.

(Additional reporting by Sam Nelson in Chicago, Gus Trompiz in Paris and Naveen Thukral in Singapore; Editing by Dale Hudson, Joseph Radford and Helen Massy-Beresford)