An Econometric Analysis of Trends and Determinants Affecting Tea (Camellia sinensis) Export Value in Sri Lanka

Tea is one of most popular beverages in the world, made from Camellia sinensis leaves and renowned for its various flavors, caffeine content, and health benefits. Considering Sri Lankan status as a prominent tea exporter, integrated econometric studies addressing the effects of production, land use, price, and macroeconomic factors on export performance are limited. The purpose of this study is to identify and examine the key factors of Sri Lankan tea export value from 2000 to 2023, utilizing secondary time-series data from the Central Bank of Sri Lanka. The analysis takes into account variables such as tea output, total cultivated area, replanted area, production costs, Colombo auction prices, quantities sold at the auction, currency rate, and export value. A first-differenced log-linear OLS regression was employed to account for non-stationarity, while multicollinearity and structural changes were addressed through careful variable selection and dummy interactions. The findings show that Colombo auction prices and currency rate fluctuations are the most important drivers of export value, with large positive effects. Tea production and production costs have positive but moderately significant benefits, whereas total cultivated area, replanted area, and auction amounts are not statistically significant. Based on the findings, policy implications emphasize the necessity of ensuring production efficiency, price competitiveness, and macroeconomic stability, rather than depending just on increasing cultivated land to improve export performance. Overall, the study concludes that strategic interventions focusing on efficiency and market-driven factors are crucial for maintaining and improving Sri Lankan tea export performance.