Wheat edged higher, building on Monday's 2.7 percent gain as spreading -- traders buying Chicago wheat and selling corn and Minneapolis wheat -- and buying ahead of expected index fund rebalancing this week supported the market. Investors in the agricultural markets are awaiting Thursday's US Department of Agriculture report on global supply/demand for grains and oilseeds for price direction. "Corn is a little firm but we don't expect a lot of action from now until the USDA report," said Adam Davis, a senior commodity analyst at Merricks Capital in Melbourne. "We have had a run up in prices, which was an adjustment to hotter and drier weather in Argentina. Now it is a wait for USDA report for price direction." Chicago Board of Trade March soy fell 0.2 percent to $12.31 a bushel by 0417 GMT while corn for March gained 0.2 percent to $6.53-1/4 a bushel. March wheat added half a cent to $6.42-1/4 a bushel. Rain showers are expected in Argentina's main farm areas this week, but climatologists question whether the amount of water to hit the drought-stricken Pampas will be enough to revive key corn and soy crops. Grain-exporting powerhouse Argentina has been hit by an unforgiving southern hemisphere summer sun, prompting analysts to cut their crop forecasts. The market noted news that China, the world's largest soy buyer, imported 5.42 million tonnes of soybeans in December, down 4.9 percent from 5.70 million tonnes in November. The December imports bring the country's total imports in 2011 to 52.64 million tonnes, down 3.9 percent on year, according to figures from the General Administration of Customs of China. China's soy imports showed a decrease for the first time since 2004 after Beijing released a large volume of state reserves last year to cool food inflation. Analysts said the number for 2011 imports was in line with expectations. "As the market is now looking at 2012, what is the outlook for imports in the New Year? Obviously, supplies are tight out of the United States and are becoming tighter out of South America because of the dry weather," said Davis. "Certainly, if the weather continues to deteriorate the South American crop, they will have to pay a higher price for beans this year. We are looking at 56 million tonnes of imports in 2012." The market is expecting the USDA to slash its estimates for South American corn and soy output in its report on Thursday. There has also been a debate over whether the USDA had understated corn used for feed in the United States in the 2011/12 season ending Aug. 31. CBOT wheat has been also supported by short-covering and buying ahead of portfolio rebalancing by index funds this week. The annual rebalancing of commodity funds was slated to start on Monday, likely near the close, and continue through Jan. 13. According to the latest trade estimates, the S&P GSCI and DJ-UBS funds combined may need to buy roughly 28,000 Chicago Board of Trade wheat contracts while selling 26,000 corn. The funds may also buy 16,000 soyoil contracts, 2,600 Kansas City Board of Trade wheat, and sell 600 CBOT soybean contracts.