Farmers, like businesses, have huge capital investments, and demand a return on those investments. If they face the choice of growing beans for $600 per acre or corn for $1,000 an acre, they will grow corn. They have no particular interest in feeding people or producing ethanol. Their interest lies in profit.
I think that we grow to much corn for food as it is. Corn is a water and resources (read fossil fuel) intensive crop that on balance has little nutritional value. If we continue to encourage people to grow crops for fuel we will drive up the prices for everything else from vegetables to meat. Committing capital to these operations is a mistake and would be better spent developing other energy resources like geo-thermal, wind and solar.
Corn as a mono-crop creates environmental degradation of farmland. Corn ethanol is not a cost effective fuel source. Artificial subsidies and price supports for corn ethanol will create disincentive to plant other crops, including important legumes, grains, vegetables, and feed crops. We need a sustainable energy policy that creates real value, not phony "green" energy.
Ethanol is unlikely to ever reach the level of demand needed to make a notable impact in the long-term prices of farm land, or influence crop-related decisions. Additionally, crops fall under the law of supply and demand. As fewer farmers grow grain, grain will become in demand and become a more popular crop.
The world, America especially, is driven by money. It is already difficult to be a farmer in America. Crops get ruined by droughts or fires yearly, and farmers struggle to make quotas. If ethanol is the future of the country, farmers will have no choice but to adjust their production accordingly. We ask them to provide us with basic necessities, yet we do little to increase their livelihood.
For one, many, if not most, farmers have owned the farms they plant in for generations. Also, consider that the difficulties and expense of importing such crops as grain far outweigh the cost of helping farmers financially, if need be, to grow these crops in America. Besides, there will always be a high demand for fresh vegetables at the grocery store.
It has been the case throughout history that farmers grow the crops that net them the most profit. It is reasonable to assume that this pattern will continue as farmers need to make a living same as the rest of the population. If the farmers who grow grain and other vegetables are to survive, there would need to be either a price increase or a government subsidy, otherwise there is no reason for them not to switch to corn.
Ethanol production has become a huge mistake. It's not the way to combat global warming, and is very inefficient. It looks green, but it's really black. It pollutes the air growing and processing all that corn. It also hurts consumer's pockets since it is directly connected to the food supply. There are better ways of powering motor vehicles, such as using electric engines.
The spike in farmland prices, due to the anticipation of ethanol and speculation, will not squeeze out other cash crops, because the prices are pure speculation. The prices of corn have been scraping the bottom of the barrel for decades, and farmers have been reliant on government subsidies on their corn crops to get by. Ethanol production may cause prices to go up, but not to the point where we have an excess of corn. Also, not all areas of the country are suited for corn production.
If production increases on some vegetables, as opposed to others, then the competition will increase on those items, driving prices down. Conversely, grain growers who decide to continue growing grain will face a diminished supply, also making their crops more valuable. Given the widespread use of grains in agriculture and commercial business, the demand can only increase.
Because some farms have soil that is not ideally suited for corn, and because all good farmers know that occasional rotation is important to maintaining soil quality, I do not believe that the high value of corn will ever fully discourage farmers from growing other crops.
Farmland prices aren't just sparking because of ethanol demand. Even without ethanol, the population and need for food is rising. But, the amount of farming acres is constant, so land prices rise anyway. Also, as ethanol/corn demand puts upward pressure on farm land prices, it also does so to food prices, in general. This will help increase the revenue for farmers of all kinds of food.
I think that it would be beneficial to all if ethanol was used as a means of fuel in all countries. Think of all the pollution that will not be emitted. Also, without our dependency on crude oil, it will allow prices of food to come down. Brazil is one of the few countries that are using ethanol, so why can't the rest of us?
Inflation fears drive people to buy assets that will retain value, like gold, silver, and real estate. And, unlike precious metals, real estate can provide income through rentals. In the case of farm land, buying farm land provides a revenue stream through each harvest, or from rent from farmers who raise crops on it. And, unlike bonds and dividend paying stocks, the value of the land remains stable over time, if not increasing, due to growing population. And, unlike companies that provide goods or services that become obsolete, there will always be a demand for farm land's product: food.