[Hoot Gibson]

Actually you have this backward, though youre on the right track. Price is the driving factor. As prices increase, supply will increase and demand will decrease.

When prices decrease, the producer will not supply as much of the good.

Prices are not the driving force in the trade of commodities - they are a reflection of the relationship of supply and demand. You said "As supply (corn) increases, the demand for it will decrease" and that is not an accurate interpretation of the laws of supply and demand. Holding all other variables constant and increasing the supply will not decrease demand...it will do the exact opposite because prices will fall and units sold will increase. Corn growers cannot increase the supply of corn after a harvest and they have very little control over the price of corn.

Producers of a commodity do not set prices in a free market. They sell their product at the market price. In the case of corn, factors like global weather patterns in corn-producing areas, transportation costs, government regulations, subsidies, and the emergence of new markets for corn (such as ethanol as a fuel) affect the supply of and demand for corn.

The basic law of supply and demand govern the trade of all commodities, whether that commodity is corn, coal, or pork bellies. If subsidies were eliminated, some farms would go under but the price of corn would theoretically increase if foreign producers could not make up the loss of production from American producers.