Forecasting annual tea production in Sri Lanka

Abstract

Tea production plays a significant role in the Sri Lankan economy. This study focused on modelling and forecasting the total annual tea production in Sri Lanka and also the annual tea productions in Sri Lankan major tea growing areas; low grown, mid grown, and high grown. The annual total tea production data from 1964 to 2015 and the annual tea production data of major tea growing areas from 1970 to 2015 were collected from the central bank reports of Sri Lanka. Time series models were fitted by the Box and Jenkins ARIMA model approach. Series were tested for stationary by the Augmented Dickey Fuller test. Differencing techniques were applied to transform non stationary series to stationary series. Model diagnostics were performed by Ljung Box test and autocorrelation function of residuals. ARIMA (2, 2, 1) was the best fitting model for the total annual tea production and also the annual tea production in the low grown areas. ARIMA (1,2,1) was the best fitting model for the annual tea production in mid grown areas and ARIMA (2,1,0) was the best fitting model for the annual tea production in high grown areas. Forecasting of annual production for respective series was made up to the year 2020. An increment of 4.08% of total annual tea production in 2020 is predicted by the fitted model and it is also expected that production increments of 5.15%, 2.6% and 4.5% in low, mid and high grown areas, respectively, compared to the average production from 2011 to 2015.