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Availability of raw materials

Demand for biodiesel is strong, and the overall US market for diesel fuel is huge. But there simply aren't enough oil crops and animal fats available to supplant much of it.

For the 2005/06 crop year, biodiesel production accounted for 5% of soybean-oil use. That's expected to rise to 13% for 2006/07, representing about 8% of US soybean production in 2006, according to Keith Collins, USDA chief economist.

However, because the demand for raw materials is increasing, Brazil and Argentina have started to increase their production of grain and oilseeds. In addition, increased production efficiency is being made possible in the US, Argentina and other countries through the use of transgenic herbicide and insect resistant soy and corn.

If global feed production grows at its current annual rate of around 2%, the world will be producing around 750 mmt of industrial feed by 2015. This will require an additional 20% of grain and oilseed meal which translates to a yearly global production of 1168 mmt of coarse grain (additional 195 mmt) and 255 mmt oilseed meal (additional 43 mmt) by 2016.

So, will there be enough grain for the future feed industry? Yes, the majority will be produced in the countries that consume it, mainly US, Mexico, Brazil and China. Production of coarse grains in excess of consumption for feed will occur in the US, Argentina, Brazil, and Central Europe.

However corn consumption for ethanol production is increasing rapidly and an increase in corn yields and hectares is seen. The demand for other corn uses, besides ethanol production, is flat or slightly declining.

It is predicted that the corn feed demand is offset by the use of Dried Distillers Grain Solubles (DDGS), which will displace more than 20 mmt of corn for feed by 2010.

In addition, new technology will make it possible to "squeeze" more ethanol out of corn, which will make the use of corn much more efficient in the future.

Also the production of oilseeds will not be a direct problem in the future. Production of soy will increase dramatically in Brazil and Argentina.

It has been estimated that Brazil has the capacity to produce an additional amount equivalent to total current US production (Sato, 2005).

US production of soybeans was projected to be 87 mmt in 2005/2006. Brazil then obviously has the capacity to cover the oilseed requirement for feed production to 2016 and beyond.

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