GRAINS-U.S. corn edges up on dry weather in Argentina

* Dry weather in Argentina underpins corn, soy

* Chinese demand in focus as soy supply tighten

* USDA reports further decline in U.S. wheat crop ratings

(Adds quotes, updates prices, previous Singapore)

LONDON, Jan 29 (Reuters) - Chicago corn and soybean futures rose on Tuesday as dry weather threatened to reduce production in major exporter Argentina while wheat prices were boosted by deteriorating crop conditions in the U.S. Plains.

Argentine farmers are watching the cloudless Pampas horizon for signs they might get the rain they need to help replenish tight world corn and soybean stocks. But weather maps show little reason for optimism in the world's No. 3 corn and soybean exporter.

After more than a month of almost unrelenting Southern Hemisphere summer sunshine, crops need moisture to ensure their healthy development.

"South American weather remains a focus of the market, it is too dry in Argentina and too wet in northern Brazil," said Luke Mathews, a commodities strategist at the Commonwealth Bank of Australia in a report.

Chicago Board of Trade March corn rose 0.3 percent to $7.31-3/4 a bushel by 1137 GMT after climbing 1.2 percent on Monday, biggest gain since Jan. 14.

Wheat prices rose as drought in the U.S. Plains led to a further deterioration in crop conditions, according to reports by the USDA's National Agricultural Statistics Service (NASS) issued on Monday.

"The state of winter wheat plants in Kansas, the country's leading growing state, has deteriorated still further," Commerzbank said in a market note.

"The situation in Oklahoma - another important growing state - is even more dramatic: only five percent of winter wheat plants there are currently rated "good", and none as "excellent"," the report added.

CBOT March wheat rose 0.2 percent to $7.81 a bushel while March milling wheat in Paris climbed 0.3 percent to 248.00 euros a tonne.

Dealers continued to keep a close watch on conditions in the Black Sea region, a key source of wheat exports.

HIGHER YIELDS

Winter weather is favourable for Ukrainian grain crop, which could see its yield rise by 20 to 30 percent in 2013, a senior Ukrainian weather forecaster said.

Autumn drought and severe frosts in almost all Ukrainian regions damaged about 2 million hectares of winter grains sown for last year's harvest, reducing the wheat crop to 15.76 million tonnes from 22.3 million tonnes in 2010.

Soybean prices also edged up with the market buoyed by anticipated strong demand from China, the world's biggest importer.

China, the world's top soybean buyer, is expected to import more than 15 million tonnes of soybeans in the second quarter, up 36 percent from its estimated purchases in the January to March period, but port congestion in Brazil could delay shipments.

March CBOT soybeans rose 0.07 percent to $14.48-3/4 a bushel.

The United States, the world's top soybean exporter, will have very tight stocks of soybeans for shipment after February until the next harvest six months later, putting pressure on South America to meet demand, said Thomas Mielke, editor of Hamburg-based Oil World newsletter.

U.S. soybean stocks are forecast to drop to a nine-year low by the end of the September/August marketing season as strong demand for the drought-reduced crop cuts supplies.

Still, latest forecasts favour Brazil's expected record soybean crop as they predict rain will move out of the center-west region to allow the harvest to continue and move to the south where dry fields need the moisture.

Local crop analysts Celeres said Brazil had harvested 3 percent of the crop as of last week, with the bulk of the harvest coming from the top two producing states of Mato Grosso and Parana - at 6 percent and 5 percent respectively.

(Additional reporting by Naveen Thukral in Singapore, editing by William Hardy)