RIO DE JANEIRO, Brazil, Aug 26 (Reuters) - Brazil's federal governmentplans to allow the blending of 2 percent biodiesel in diesel fuel beforethe end of 2004, the agriculture ministry said on Thursday."Brazil has a large number of products, such as soybeans, sunflowerseed, castor beans and oil palm, with which to produce biodiesel," theministry said in a statement.It said that the green fuel won't reduce engine performance and wouldreduce diesel imports and create jobs, especially in family farming.The government aims to increase the biodiesel blend to 5 percent withinfive years.The official news agency Agencia Brasil said that a 2 percent biodieselblend could create more than 150,000 family farming jobs in 2005 due toincreased demand for castor beans and other agricultural raw materials.Use of locally produced biodiesel would also reduce diesel imports,estimated at 6 billion liters annually and 16 percent of total dieselconsumption, it added.