U.S. corn futures are expected to start near a 32-month high Wednesday as strong demand continues to fuel concerns about dwindling supplies.

Traders predict futures will open up 3 cents to 5 cents a bushel at the Chicago Board of Trade.

In overnight electronic trading, nearby corn for March delivery rose 4 cents, or 0.6%, to $7.31 1/4 a bushel, the highest price for a front-month contract since July 2008. Most-active corn for May delivery edged up 3 3/4 cents, or 0.5%, to $7.39 1/4, near its contract high of $7.44 1/4.

Demand for corn remains strong despite high prices, as users of the grain are scrambling to secure supplies, traders said. A drop last week to the lowest price in four weeks renewed buying and has helped spark a fresh rally, they said.

"There are not too many people selling on breaks here," said Jerry Gidel, analyst for North America Risk Management Services, a brokerage firm in Chicago.

Corn futures have rallied 125% since June on concerns about tightening supplies, surging recently in an attempt to slow demand and encourage farmers to sow more acres this spring. Farmers are worried about the potential for poor weather this spring and summer, as a large autumn harvest is critical for replenishing supplies.

Demand has stayed strong, with weekly U.S. export sales topping one million tons for the past four weeks. The U.S. Department of Agriculture will issue its next sales report Thursday.

"We would expect that the market could take somewhat of a breather ahead of the Thursday's export sales report, but if demand fails to slow down... the markets will see that as a reason to add additional risk premium," Benson Quinn Commodities told clients in a note.

Improving margins for ethanol production also could increase exports of the biofuel, analysts said. Chatter in the market focuses on the potential for exports to Brazil, where the biofuel is made from sugar. Surging global prices for sugar are "supporting the gains in U.S. ethanol trade to Brazil, and additional cargoes are likely to be sold," according to AgResource Co., an agricultural consultancy in Chicago.

Demand also is strong in China, where corn prices in major producing areas rose in the week to Wednesday, as starch and alcohol companies replenished stocks. Farmers and traders are reluctant to sell their stocks, expecting prices to go up further, the China Corn Network, a consultancy tracking physical corn markets, said in a research note Wednesday.