Euan, the real reason why there will probably be an increasing diversion of agricultural feedstock into biofuels production is not environmental concern about climate change. That's just a good-sounding red herring. Rather, the real reason is just selfishness, specifically trying to keep the happy motoring way of life in as much and for as long as possible.

At the risk of being repetitive, I'll expand my view using some material from previous posts.

Turning soybean (or sunflower, or rapeseed) oil into biodiesel is a proven, cheap, scalable technology with EROEI > 1. When high enough oil prices make it viable, a huge share of today's agricultural production from Brazil, Argentina, Paraguay, etc. will very probably be diverted into biodiesel production. Land arbitraging based on profits per acre will then divert land from wheat and corn into soybeans. Food exports will drop, and poor people will be priced out of food. (1)

And the fact that using the entire Earth's arable land for biodiesel would not even approach today's GLOBAL oil consumption is meaningless. Those countries have much lower per capita oil consumption than OECD countries, so maximizing their biodiesel production for THEIR own use will allow them to run the critical part of THEIR economies for ever.

I'm not saying that's the way things should be. I'm saying that's the way things will most probably be. So, just as oil importing countries should not count on increasing oil imports (actually they should count on decreasing oil imports), so should food importing countries.

To be clear, I'm saying it is very likely that there will be less and less food and consequent massive starvation in the next decades, that in effect the world is at peak food now, that the third horseman is coming driving a biodiesel-powered SUV.

All this doesn't sound good, but I suggest the following mental exercise. Assume you are in England in 1938 and have the opportunity to broadcast a radio message to all Jews in Germany. What will you tell them?
a. "The German government must respect your human, civil and political rights."
or
b. "In a very short time, the German government will start enslaving and killing you."?

And in contrast to the Holocaust, the coming starvation will not come out of the evil madness of a few. It will be the result of the foreseeable majoritarian consensus of whole societies, driven by selfishness. Will you say to Argentines "Don't produce biodiesel, learn to live without fuels, go back to horses and oxen, and keep exporting wheat to the hungry of the world"? Won't they reply "Since when do we have the duty of feeding the world?"

Moreover, the Natural Gas depletion issue will actually PUSH the process, because:
a. soybean has less fertilizer requirements than grain crops (2), and
b. many of the electric power plants in South America are NG-fired but can also burn diesel oil. Therefore biodiesel will in effect free NG for home, fertilizer, and other uses.

(1) That's beginning to happen right now, as per the December 17 FAO communique at
http://www.fao.org/newsroom/en/news/2007/1000733/index.html

(2) From the National Academy of Sciences recent report titled "Water Implications of Biofuel Production in the United States" at http://www.nap.edu/catalog.php?record_id=12039

"Nitrogen application rates are much lower for soybeans than for corn because soybeans, which are legumes, fix their own nitrogen from the atmosphere. Pesticide application rates for soybean are about half those for corn."
...
(The key) "index is inputs of fertilizers and pesticides per unit of the net energy gain captured in a biofuel. To estimate this first requires calculation of a biofuel’s net energy balance (NEB), that is, the energy content of the biofuel divided by the total fossil energy used throughout the full lifecycle of the production of the feedstock, its conversion to biofuel, and transport. U.S. corn ethanol is most commonly estimated to have a NEB of 1.25 to 1.3, that is, to return about 25-30 percent more energy, as ethanol, than the total fossil energy used throughout its production lifecycle. The NEB estimated for U.S. soybean biodiesel is about 1.8 to 2.0, or about a 100 percent net energy gain."
...
"Per unit of energy gained, corn ethanol and soybean biodiesel have dramatically different impacts on water quality. When fertilizer and pesticide application rates are scaled relative to the NEB values of these two biofuels, they are seen to differ dramatically. Per unit of energy gained, biodiesel requires just 2 percent of the N and 8 percent of the P needed for corn ethanol. Pesticide use per NEB differs similarly."