UPDATE 2-India govt sees low rice, cane output, imports loom

* Worst monsoon in 37 years hits grain harvest

* Cane output to fall 9 percent, rice seen 18 percent lower

* India's spot sugar price up 5 pct to a record

(Recasts, adds trade, analyst comment on imports)

By Mayank Bhardwaj and Ratnajyoti Dutta

NEW DELHI, Nov 3 (Reuters) - India's summer-sown crop output
is set to shrink by more than initial forecasts after its worst
monsoon rains in 37 years, raising the spectre of higher food
prices and its further dependence on imports of rice and sugar.

Output of rice planted in the monsoon months from June could
record a bigger-than-expected fall of 18 percent on year, while
cane output was likely to drop by 9 percent, the government's
first estimates of the summer-sown crop showed on Tuesday.

The government issues four estimates of harvests as it
gathers more data.

"Output projections will have impact on prices. It will
support the price uptrend and our import dependence will go up,"
said Veeresh Hiremath, a senior analyst with Karvy Comtrade, a
commodity brokerage based in the southern city of Hyderabad.

Lower cane availability led to more than 40 percent drop in
sugar output to about 15 million tonnes in the year to
September, forcing the country to permit tax-free imports of
raws and whites.

Large imports by India, the world's top consumer and biggest
producer after Brazil, has helped New York sugar futures SBH0
surge to the highest in nearly three decades, while Indian spot
prices rose 5 percent on Tuesday to a record 3,353 rupees
($70.9) per 100 kg.

Food prices would definitely go up after these estimates,
said S. Raghuraman, head of research, Agriwatch, a commodity
research firm.

Anil Singh, secretary of the National Alliance of Farmers'
Associations, said lower cane output would further increase
imports of sugar.

Traders and analysts say Indian mills have so far contracted
to import about 500,000 tonnes of raws and 300,000 tonnes of
whites since early this year when import duty was abolished.

RICE IMPORTS

The government expects rice output to fall about 15 million
tonnes, or about 18 percent on year, highlighting a shortage
which prompted Indian state agencies to float tenders to import
30,000 tonnes. [ID:nDEL345738]

A senior government official said output estimates might be
revised upward as many states were still harvesting
summer-planted crops.

"Drought has hit the food grain output but this is only the
first estimate. A clear picture would emerge by February," said
N.B. Singh, farm commissioner.

India initially estimated a fall of about 10 million tonnes
in rice output, but last week, the U.S. Department of
Agriculture forecast a 15-17 million tonnes decline from last
year's record output of 99.2 million tonnes.

Below are the current government estimates versus year ago:

(in million tonnes)
------------------------------------------------------

2009/10 2008/09 pct change
------------------------------------------------------ Rice

69.45 vs 84.58 -17.9

Corn 12.61 vs 13.90 -9.3

Cane 249.82 vs 273.91 -8.8

Oilseeds 15.23 vs 17.88 -14.8

Food grains 96.63 vs 117.7 -17.9
------------------------------------------------------
(Reporting by Mayank Bhardwaj and Ratnajyoti Dutta; editing by
James Jukwey)