Limited farmer selling is tightening supplies in the cash market supply chain, and with export demand rising, elevators are forced to raise basis bids to pry grain loose from farmers reluctant to sell, analysts say.

Farmers have been reluctant sellers of grain since prices dropped after government forecasters estimated U.S. and world grain supplies at higher-than-expected levels. Producers are seemingly comfortable with their cash flow needs, and even the recent improvement in basis is not enough to generate aggressive selling.

Basis is the difference between cash and futures prices.

The closely watched U.S. Department of Agriculture crop report released last week showed more ample U.S. and world supplies than traders anticipated.

Meanwhile, the drop in spot and futures prices since the government report is drumming up fresh export demand, particularly for corn. Higher South American basis levels and lower futures prices make U.S. corn prices more competitive in world markets.

Private exporters reported to the USDA export sales of 154,700 metric tons of corn for delivery to Mexico during the 2011/2012 marketing year; and sales of 110,000 metric tons of corn for delivery to South Korea during the 2011/2012 marketing year.

South Korea has bought 230,000 tonnes of corn this week, with all but one 50,000 tender coming from the U.S., with each of the country's four main feed grain importers buying a cargo. South Korea has purchased nearly 800,000 tonnes of corn since Jan. 6.

Basis levels rose by 2 to 4 cents for corn at the U.S. Gulf and 3 cents for soybeans, according to USDA data.

Processors and ethanol plants in the eastern Midwest report cash corn basis in a range from 6 cents under March futures to 22 cents over March futures. The range of prices is unchanged to up 2 cents from Wednesday, according to data from USDA.

-By Andrew Johnson Jr, Dow Jones Newswires, 312-347-4604 begin_of_the_skype_highlighting 312-347-4604 end_of_the_skype_highlighting, andrew.johnsonjr@dowjones.com