Factors Affecting Sri Lankan Cinnamon Export Income

Abstract

Ceylon cinnamon, renowned for its superior flavour and delicate appearance, faces distinctive challenges in the global market due to its higher cost and limited availability compared to cassia cinnamon. The major objective of this paper is to identify and analyse factors influencing the export income of Ceylon cinnamon in the areas of production volume, exchange rate, domestic consumption, and land area. The study quantifies the impact of these variables on export income by applying multiple linear regression analysis to data from the period 1992 to 2022 in Sri Lanka. The findings of this paper depict that variation in the exchange rate, domestic consumption, and land area significantly increase Ceylon cinnamon export income, indicating that cultivation and productivity do improve export earnings. On the other hand, it has shown that production volume negatively affects export income. This suggests that the quality and effective use of production outcomes are lower than expected, which adversely affects export volume and earnings. The research findings would, therefore, be of immense use to policymakers, exporters, and the industry in formulating strategies to enhance the cinnamon export sector in Sri Lanka. Key factors that would help stakeholders include interventions targeting production efficiencies, currency risk management, and maintaining a balance between domestic demand and international market dynamics. The research also fills gaps in the literature by focusing on Ceylon cinnamon and its export dynamics, thereby contributing to the sustainable growth and competitiveness of Sri Lankan’s agricultural export sector