U.S. corn and soybean futures edged higher on Friday, stabilizing after Thursday's steep slide amid renewed concerns about dry weather hurting crops in South America. Chicago Board of Trade corn for March delivery gained 0.5 percent, or 3-1/2 cents, to $6.47 a bushel at 10:05 a.m. CST.

March soybeans rose 0.1 percent, or 1 cent, to $12.10 a bushel. Soft red winter wheat for March delivery rose 0.4 percent, or 2-1/2 cents, to $6.31-3/4 a bushel. Prices were pushed higher by expectations for rain in parched areas of Argentina, the world's second largest corn exporter behind the United States.

Key growing areas will likely receive 1/2 to 1-1/2 inches of rain early next week, not the 1 to 3 inches some forecasters were predicting on Thursday, said John Dee, president of Global Weather Monitoring. Prices tumbled on Thursday on projections for a large dose of badly needed rain.

"Those that were buying into the 1 to 3 inches yesterday are the ones that are saying, 'Oh, no, no, it's not as much rain' now," Dee said.

Persistent dryness in Argentina and parts of Brazil has raised concerns about global corn and soybean supplies in the months ahead, lifting benchmark U.S. prices to multimonth highs earlier this week.

Traders project export demand may shift to the United States if South American farmers suffer serious crop losses.

In Argentina's main crop belt, which includes much of Buenos Aires province, Santa Fe, Cordoba and Entre Rios, high temperatures are expected to intensify already-dry conditions. Private analysts have already cut their forecasts for corn and soybean production in South America due to the harsh weather.

Traders suspect the U.S. Department of Agriculture will follow suit when it issues a monthly supply and demand report on Thursday.

"I do think you're looking at a cut of some sort," said Jim Gerlach, president of A/C Trading.

Farmers in Argentina fear a repeat of a devastating drought that scorched fields and wiped out entire herds of cattle in 2009. Yet, in a weekly crop report issued on Thursday, the Buenos Aires Grains exchange refused to cut its corn area estimate of 3.74 million hectares, saying relief was on the way.

In Brazil, two important corn and soy regions, Parana and Rio Grande do Sul, made sharp cuts to crop forecasts on Thursday after weeks of dry weather dented harvest prospects.

DEMAND STAYS WEAK Concerns about the crop losses have not yet significantly boosted demand for U.S. farm products. U.S. corn export sales last week fell to a seven-week low and soybean sales hit a nine-week low as rising prices limited buyer interest during a holiday-shortened trading week, according to U.S. Department of Agriculture data issued on Friday. 

Net corn export sales in the week ended Dec. 29 fell 11 percent from the previous week to 305,900 tonnes, below trade estimates for 350,000 to 550,000 tonnes. Net soybean sales of 281,300 tonnes were below trade forecasts for 400,000 to 550,000 tonnes and down 68 percent from the prior week. Net export sales of all varieties of U.S. wheat last week plunged 61 percent to 168,100 tonnes, the lowest level since February 2010. Analysts had expected sales to 300,000 to 450,000 tonnes. Wheat growers got more bad news about demand as Egypt, the world's top importer of the grain, snubbed the United States in a tender. It bought 240,000 tonnes of wheat from the Black Sea region and France.

(Additional reporting by Nigel Hunt in London, Naveen Thukral in Singapore and Gus Trompiz in Paris; editing by Jim Marshall)