When government subsidizes the production of ethanol and slaps tariffs on imported ethanol, what are the probable effects?
Corn prices have already begun to soar. A rush to turn more acres into corn production could decrease supplies of other commodities, driving up prices of them as well.
Ag land has alternative uses. When the return earned from producing one commodity is bolstered by subsidization, farmers will, all else equal, plant more of that commodity and less of another commodity when the amount of land used in agriculture is fixed. Another possibility in areas like mine (a small, growing midwestern city surrounded by farmland) is that property values, and the prices of new homes, could be pushed up as subsidization raises the return from using land for agricultural purposes.
The resulting higher market prices could then dampen the public's support for government subsidies that are designed to help farmers reap profits when markets are down.
I'll believe subsidy decreases when I see them.
Sunding envisioned a scenario in which price supports for farmers are replaced by another government program — one to purchase food to keep prices affordable and prevent hunger.
There's nothing quite like mestastizing government policy.