THE sky may well be the limit for future demand for vegetable oils,

according to Richard Matthews, former managing director of United

Oilseeds.

The demand will be fuelled -- almost literally -- by emergence of

biodiesel as a non-

polluting energy source, particularly for urban areas and by the

pent-up demand due to be unleashed by the Chinese.

Speaking at the Agra Europe Outlook conference in London, he predicted

this would lead to the area limitations for oil seed crops laid down in

the Blair House agreement being scrapped and the agreement torn up.

Even accepting the wide gap in production costs between ''black''

mineral diesel and biodiesel of up to 20p per litre, he said governments

would have to act because of the polluting effects of black diesel in

built-up areas.

''As more work is done the environmentally beneficial results of

biodiesel become more and more apparently. Where governments recognise

this -- in Austria, Germany, France and Italy -- so stimulus is being

given biodiesel production from oil seeds grown on set-aside land.

''It is only a matter of time that the evidence for restricting diesel

use in urban centres to biodiesel alone is so overwhelming that duty

concessions will appear and biodiesel will actually go to a premium at

the pump to black diesel. In turn this will mean that the production

requirement will run past what can be produced from set-aside land.''

If that was not enough, he predicted soaring demand from the 1.2

billion population of China which had already been the main driving

force in the upswing in world oil prices last year. This was on the

basis of an additional import of two million tonnes per annum against

their consumption of 10 million tonnes.

The trend would change the price relationship between protein and oil

from oil seeds in favour of the latter and thus generally in favour of

soft seeds such as oilseed rape. Rapeseed breeding for new values as

specialist uses has been able -- and will continue to be bale -- to

outstrip hard seeds such as soya beans.

''This will start to take rapeseed oil out of its traditional

positions as a commodity oil and divorce its value from soya bean oil

where breeding will never be able to respond in the same way and soya

bean oil will be left behind in the commodity sector,'' said Mr

Matthews.