Reservation demand is a name for the schedule of reservation prices at which a seller would be willing to sell different quantities of the good in question.
Importantly, the subsidies raise the reservation prices less well-managed farms seek from other better managed farms in the transfer of farms to larger and better managed farms.
The consumer then buys the good as soon as it is equal to their reservation price, as they realize price will not fall further unless they purchase it.
In theory, yes, except that the system has an auction reservation price of $1.86 per ton built in, thereby creating a price floor of precisely this amount.