Corn prices are soaring amid signs of falling U.S. supply, a trend that is boosting shares of major potash producers and adding pressure for BHP Billiton Ltd. to raise its $38.6-billion bid to acquire Potash Corp. of Saskatchewan .

Corn prices jumped more than 8 per cent Monday morning, reaching a two-year high. Corn's move was the biggest one-day advance since mid-1973, when a Russian grain embargo was in place. Over the last two trading days, corn prices have shot up 15 per cent, taking their advance to about 75 per cent since June.

The corn market is on the move because of downward revisions for crop yields in the United States, the world's largest corn producer and exporter, and in Europe, combined with a tightening wheat market and rising investor demand in commodities, Standard Chartered analyst Abah Ofon said in a report. "The rally in corn is largely justified, given current market developments," he wrote.

The rise of corn and other food-commodity prices is sending shares of potash producers and agribusiness companies higher as well amid expectation for higher demand. As corn prices rise, farmers receive more income for their crops, allowing them to spend more on fertilizers. Falling crop yields also encourage farmers to use more fertilizer, increasing demand for potash and other fertilizer ingredients.

Share price increases for Potash Corp. and its rivals - Agrium Inc., Mosaic Co. and CF Industries Holdings Inc. - have all risen in tandem with corn prices since Aug. 16, the day before BHP announced its $130 (U.S.) a share hostile offer for Potash Corp.

Since then, Potash Corp., which closed Monday in New York at $147.48, up 1.2 per cent, has risen about 31 per cent. CF is up by a similar amount, while Agrium has climbed 25 per cent and Mosaic 29 per cent.

Those gains show Potash Corp. shares would likely have climbed sharply even without a BHP bid, diminishing the appeal of the bid's premium over Potash Corp.'s stock price at the time, investors noted. "What started [in August] as a rival bid premium appears to have morphed into a corn price premium. There is no takeover premium left in the stock," said a hedge fund analyst in New York, who declined to be quoted by name.

Potash Corp. CEO Bill Doyle made a similar argument in an interview last week, arguing potash-market fundamentals would eventually spur the company's stock price well beyond its previous highs of $240 a share if Potash Corp. remained independent.

Corn's price surge Monday followed Friday's report from the U.S. Department of Agriculture that forecast American farmers would harvest about 12.7 million bushels of corn in the 2010-11 crop year, down 4 per cent from its last estimate, because of lack of rain in some areas, too much rain in others and hot weather in the Eastern corn belt.

Benchmark prices in Chicago trading reached $5.73 a bushel on Monday before settling back slightly.

BHP's offer expires Nov. 18, giving potential rival bidders only five weeks to launch offers. Various media reports suggest that potential bidders are mulling various proposals, including a possible bid led by China's Sinochem.

One report said that Potash Corp. is considering a recapitalization that would pay out special dividend of $70 a share, financed in part by the sale of the company's nitrogen business and other assets. And Ontario Teachers' Pension Plan is believed to have spoken to the Singapore government's Temasek fund about a potential bid, though a person familiar with the situation said the pension fund has not yet decided to join any potential bid. A Teachers spokeswoman declined to comment over the weekend.

With files from Tara Perkins and Brenda Bouw