Brazil's soy production may stagnate in early 2009 partly due to a change in government crop preference and policy, according to oilseeds analysts Oil World.

Brazilian soy output forecast for early 2009 has been cut to 60-61 million tonnes, about the same level as this year's 60.3 million tonnes but below the previous projection of 63 million tonnes.

Oil World said the Brazilian government now prefers the plantings and production of wheat, corn and black beans in an effort to better satisfy the growing domestic requirements.

Sharp declines in global soy prices have led to farmers in Mato Grosso area to be offered prices that are below production costs, and high fertiliser costs are forcing farmers to cut back on fertiliser use, according to Oil World.

Reduced application of fertilisers and other inputs may lower yields and total output, Oil World added.

Meanwhile, the Brazilian government has launched an Amazon rainforest protection fund that will limit crop cultivation and livestock production in the Amazon region, Oil World said.

Most farmers still favour soy, which bear a lower risk of export restrictions than domestic staple food, like grain and meat, Oil World said.