By Arijit Bose and Swati Verma
(Reuters) - Thai rice export prices eased this week, but traders worried that supplies of the staple could be disrupted by severe drought this year even as demand remained muted in most Asian hubs.
In Thailand, the world's second largest rice exporter, benchmark 5 percent broken rice prices were quoted at $395-$396 a tonne, free-on-board Bangkok, compared with $400-$404 last week.
Traders said prices remain at elevated levels because of the diminishing supply after the seasonal harvest last month.
"Domestic prices have been higher due to the lack of supply, and rice mills are unwilling to sell because of concern about the prospect of severe drought this year that could harm future supply," a Bangkok-based trader said.
Demand for Thai rice has been slow since the start of the year due to strengthening of the baht against the U.S. currency.
"There are interests in markets like the Philippines and Iraq but Thai prices at the moment are not as competitive as India and Vietnam," another trader said.
In Vietnam, rates for 5 percent broken rice were at $360 a tonne, the same as last week.
"We are seeing steady orders from the Philippines, especially now that buyers from the country can buy as much as they want instead of being subject to a government quota as before," a trader based in Ho Chi Minh City said.
The Thai government buying rice for stockpiling has helped allay pressures from an increase in supply, especially as farmers in the Mekong Delta, Vietnam's rice bowl, have harvested about 90 percent of their winter-spring crop, traders said.
Meanwhile, government data released on Friday showed Vietnam's rice exports in the first quarter fell 11.5 percent from a year earlier to 1.31 million tonnes.
Top rice exporter India also witnessed sluggish demand, with 5 percent broken parboiled variety quoted around $390-$393 per tonne this week, unchanged from last week.
"Indian rice is not competitive due to rising rupee," said an exporter based at Raipur in the state of Chattisgarh.
Additional signs of concern for exporters emerged as a government endorsed four-month subsidy of 5 percent for non-basmati rice exports ended on March 25.
"Due to export incentives, traders were quoting lower prices in the last few months. But now they have to raise prices as subsidy support is not available," the trader said.
Neighbouring Bangladesh will procure 1.25 million tonnes of rice from local farmers in the upcoming harvesting season, the country's Food Minister said earlier this week.
There are 1.3 million tonnes of rice, the staple grain for 160 million people of Bangladesh, in state warehouses.
(Reporting by Rajendra Jadhav in Mumbai, Panu Wongcha-um in Bangkok, Khanh Vu in Vietnam, Ruma Paul in Dhaka; editing by David Evans)