INTERVIEW-UPDATE 2-Sugar seen soaring above 20 cts/lb-M.Stanley

* India output forecast may be too high - M.Stanley

* Indian sugar imports '09/10 seen at 5 million tonnes

(Adds details, updates prices)

By David Brough

LONDON, Aug 3 (Reuters) - Raw sugar futures SBc1 are expected to break soon above the psychological 20 cents per lb, a 28-year high, due to tight supply in Brazil and India, Hussein Allidina, head of commodity research at Morgan Stanley, said.

"India is too dry and Brazil too wet and this comes in the face of a 9 million tonne (global) deficit in 2008/09," Allidina told Reuters in an interview by email on Monday. Brazil and India are the world's top two growers of the sweetener.

India's sharp appetite for sugar on the international market has driven up sugar futures prices by around two-thirds this year. India had a poor harvest in 2008/09, and a disappointing monsoon this year looks likely to erode next season's output.

Rains in Brazil, the world's number 1 sugar producer and exporter, have slowed harvesting in the main centre-south growing region, adding to the bullish pressure, dealers said.

Prompt ICE raw sugar futures SBc1 surged to a 3-1/2-year peak of 19.43 cents per lb on Monday before easing slightly to 19.25 cents, up 0.64 cent or 3.4 percent, at 1525 GMT.

London white sugar futures LSUc1 hit a record high of $505.90 per tonne, before losing ground to stand at $503.50 per tonne, up $11.70 or 2.4 percent, in modest volume of 3,228 lots.

Allidina said the lack of rain in India could mean that Morgan Stanley's present output predictions may be too high.

"The lack of precipitation in India increases the likelihood that 2009/10 production estimates prove too optimistic," he added, referring to the weak and erratic monsoon.

New York-based Allidina said for now, Morgan Stanley was sticking to its forecast of Indian sugar output of 19.4 million tonnes in 2009/10, compared with an estimate shy of 16 million tonnes in 2008/09.

"However, (we) are increasingly thinking the number (for 2009/10) is too optimistic," he said.

INDIAN IMPORTS

Morgan Stanley has modelled Indian sugar imports at 5 million tonnes in 2009/10, in line with other analysts' forecasts.

"However, our production number may prove too optimistic, requiring the shortfall to be met with higher imports," Allidina said.

The analyst also referred to concerns over the slow harvesting of cane in Brazil due to the recent rains.

"For Brazil as a whole, we estimate that cane production will reach 620 million tonnes in 2009/10. Of this, we see 43 percent being used for sugar (and the remainder for ethanol)," he said.

"Net, we see Brazilian production reaching 35.7 million tonnes. However, should the rains continue, cane will be left in the field, presenting downside to our (production) forecast." (Reporting by David Brough; editing by Anthony Barker and Sue Thomas)