Vegetable oils output to fall short in 2011: Oil World

AMSTERDAM (Reuters) - Global vegetable oil production this year will not suffice to meet the needs of biodiesel industry, the output of which is expected to increase 10 percent from 2010, Oil World said on Tuesday.

Drought in Europe has damaged this season's crop of rape seed, which is used to make biodiesel, while heavy rains in the United States delayed the planting season, hitting global supplies.

German-based Oil World said in its weekly report that it expects biodiesel production in 2011 to rise by 0.3 million tonnes from last year in Brazil and by 0.4-0.5 million tonnes in Argentina.

It added that biodiesel production was also expanding substantially in Indonesia and Singapore, adding "we assume most of that will be for export to Europe."

But it said that production of biodiesel in Europe will be flat and only 40 percent of the available capacity will be used.

Total global consumption of vegetable oils is likely to rise 3.6 percent to 176 million tonnes this year, from 170 million tonnes in 2010, it said.

About 60 percent of the increase is expected to be used in the food industry to meet demand from a rising population, leaving only 2.4 million tonnes for the energy market and oleochemical industry.

The tight supplies of vegetable oils could drive up food prices, Oil World said, urging governments to fine-tune their policies on biofuels: "Mandates should be reduced in periods of insufficient world production and looming global tightness of vegetable oils and fats."

(Reporting by Ivana Sekularac, editing by Anthony Barker)