"Food manufacturers are getting nervous about the effect on prices," said Pascal Cogels, Director General of the European vegetable oil producers and processors federation Fediol.

A month and a half ago, global crude oil prices exceeded those of soy, palm and rape oil for the first time, making biofuels made of vegetable oils even more attractive in the EU, where tax incentives have already stimulated alternatives.

As a result, rape oil -- the most popular for the EU's biodiesel industry -- gained about 100 euros a tonne to 620, leaving food producers, such as Anglo-Dutch major Unilever, scrambling to find material to cover their needs for the next 4-5 months, traders and industry officials said.

German-based oilseeds newsletter Oil World predicted that an expected boom in EU usage of rape oil for biofuels in 2005/06 would slash consumption in the food sector by 100,000 tonnes.

"This has created great concerns in the food industry," the weekly newsletter said. "Several consumers in the food industry have started switching to sun oil and palm oil."

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

Traders and analysts said 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.

Oil World forecast record imports of 200,000 tonnes would cover the gap in the EU's 2005/06 rape oil needs, 56 percent of which -- 3.38 million tonnes -- would be used for biodiesel.

"Imports, mainly from Canada, would take some steam off the market," a vegetable oil trader at a European trading house said. "But unless crude oil drops below $50 a barrel overnight, which looks impossible, rape oil will stay firm".

Filling stations in the Netherlands, for instance, sell diesel made of crude oil at some 1.18 euro per litre, while pure rape oil for converted diesel vehicles is offered at 0.65 euros.

FEARS ABOUT THE FUTURE

While short-term food needs seem covered, the growing race in Europe to expand biofuel capacity raises the question whether there will be enough vegetable oil in the future and what the economic implications might be.

Some analysts say EU policymakers should not only stimulate biofuels but also boost domestic production of energy crops by shifting subsidies from the grains sector, which has seen several years of surpluses, to oilseeds producers.

"I wonder whether it is not ironical to see that ... we might have to import vegetable oils. This, when in the EU we are massively overproducing cereals, spending huge amounts of money to finance intervention purchases, storage costs and export refunds," Fediol's Cogels said.

Another solution might be to tap the agricultural potential of the EU's new mostly eastern European members, such as Poland, said Frederic Tuille, biofuels expert at the French association for promotion of renewable energy Observe'ER.

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.

Projects have mushroomed in some countries, such as the Netherlands, to produce electricity out of vegetable oils.

There is a trend to direct usage of refined rape oil, or a mixture of rape and sun oil, in trucks and diesel cars. Some German and French farmers have built crushing facilities to process pure oil and use it as fuel.

Analysts say Europe's fears about a potential squeeze on food production are bolstered by the worldwide spread of the "green" fuels rush.

"If only the world had listened to (Rudolf) Diesel 100 years ago, we wouldn't have those puzzles now," one trader said.