CHICAGO (Dow Jones)--U.S. soybean futures are expected to start higher Friday, driven by renewed concerns over South American weather and weakness in the U.S. dollar.

Analysts project soybeans to open 6 cents to 8 cents higher on the Chicago Board of Trade. In overnight trading, the January future, the most active contract, was up 7 3/4 cents at $12.87 1/2 a bushel.

Weather is the main fundamental topic analysts are watching, with traders adding risk premium to prices on the uncertainty of South American crop potential in the midst of dryness issues for Argentina and parts of Brazil, said Jason Roose, analyst with U.S. Commodities, an advisory firm. It is a necessity for South America to raise large crops this year, and the slightest indication they will not generates buying.

Brazil and Argentina are the world's second- and third-largest producers of soybeans behind the U.S. and are counted on to relieve the strain on U.S. supplies amid strong global demand.

"Major dryness deficits exist in key areas of the corn and soybean belt of Argentina--eastern Cordoba, Santa Fe, Entre Rios, and northern Buenos Aires," T-storm Weather, a private weather forecaster said in a morning forecast.

"We estimate that 50% of the production region for each crop is much too dry with nearly all corn and soybean areas having been drier than average since mid-October, T-storm Weather said.

"Therefore, we suspect widespread and heavy rain is needed, and this is not foreseen as humidity remains too low for organized thunderstorms to develop," T-storm added.

Export demand continues to underpin prices, as China still has a strong appetite for U.S. soybeans reflective of Thursday's U.S. Department of Agriculture export sales report showing larger-than-expected sales to foreign importers, Roose said.

Soybean futures reached 26-month highs last month on worries strong demand from China, the world's largest soybean importer, was draining supplies.

The slide in the dollar, which makes U.S. exports more attractive and broader strength in commodities is expected to trigger buying by funds that speculate on commodity prices.

The dollar fell sharply against its major rivals Friday after a weaker-than-expected U.S. jobs report dampened outlooks for a U.S. economic recovery.

Furthering the gains is spillover support from wheat futures, which rallied nearly 3% in value overnight on ongoing weather concerns for wheat crops in the western U.S. Plains and Australia.

However, futures may trade in both negative and positive territory as traders remain cautious of holding onto risky positions amid high volatility in the markets resulting from ongoing tensions in Europe and Korea, Roose added.

-By Andrew Johnson Jr., Dow Jones Newswires; 312-347-4604;