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INTERVIEW - Fuel Use Spreads Vegoil too Thin for Margarine Firms

Date: 21-Oct-05
Country: THE NETHERLANDS
Author: Anna Mudeva

Big European food makers like Anglo-Dutch Unilever are concerned about getting enough rape oil as soaring crude oil prices prompt biofuel producers to ratchet up production, an industry association said.

"If the current trend in EU biodiesel production continues over the coming five years, our estimates indicate that the rape oil usage for biodiesel production alone would exceed the total rape oil production volume," Inneke Herreman, secretary general of the International Margarine Association of the Countries of Europe (IMACE), told Reuters.

Soaring crude oil prices have made biofuels produced of rape, soy and palm oil even more attractive in the EU, where tax incentives have already stimulated the "green" fuels.

Herreman said the margarine industry, whose biggest member is Unilever, wants policy makers to take their concerns onboard and stimulate energy alternatives made from non-edible oils, instead of those oils fit for human consumption.

"The EU food industry is thus facing an ever-tightening residual supply and sharply rising prices of rape oil, further encouraged by the high mineral oil prices," she said.

Rape oil -- the product most used by the biodiesel industry because of its availability and quality -- has gained about 100 euros a tonne since early September to about 627, leaving food producers scrambling to find material to cover their needs.

SUPPLIES SOLD OUT

EU processors have sold out their rape oil until January and most of it for the beginning of next year.

Margarine producers are the biggest users of rape oil in the food industry.

Herreman said mayonnaise, salad dressing and some chocolates producers, who use rape oil, were also affected. The supply squeeze have forced producers to switch to sunseed oil.

Traders and analysts say imports of rape oil next year and a big European 2005 rapeseed crop meant food needs would be covered in the coming year, even though edible oil users would have to put up with higher prices.

Analysts also say high rape oil prices could encourage farmers to increase rapeseed plantings next year.

But Herreman said their big worry was whether there would be enough vegetable oil in the long term given the growing race in Europe and other parts of the world to expand biofuel capacity.

"Moreover, this trend of rising biodiesel production and increased direct mixing of edible oil with diesel is now expanding beyond the EU and (has) come to include soy and palm oil as well," she said.

"The world could then face a major and sharply price-increasing conflict of demand for edible oils for food usage and for alternative energy."

The EU has seen an unprecedented rise in biofuel capacity in the past two years as governments promote green fuels to reduce greenhouse gas emissions and crude oil bills. The EU targets a 5.75 percent biofuels share of total fuel consumption by 2010.

Herreman said EU governments should take food producers into account when reviewing their policies to grant tax incentives for biofuel production and urgently consider other energy alternatives, such as biomass.

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Reuters
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