• August 2021 retail prices for common varieties of fertilizer have increased 60-75% versus one year earlier. • The upsurge in fertilizer prices hinders Malawiʼs ability to achieve the national goal of increasing fertilizer applications, most notably through the Agricultural Input Program (AIP). • The main drivers of domestic fertilizer price increases come from the global market ‒ 90% of the increases in domestic fertilizer prices are attributable to increases in global prices for fertilizer and fuel, and a weakening of the Malawi Kwacha. • Domestic margin increases explain the remaining 10%, though this is also driven by higher transport costs associated with higher global prices for oil and fuel. • Increased global fertilizer demand (and thus prices) is driven primarily by increased food prices, stemming partly from many countries rebounding from Covid-19 while global food supplies are lower than usual. • The expansion of agricultural area, good weather in major production regions, and rising input costs are also affecting global fertilizer prices. • The fertilizer price surge is most likely a temporary phenomenon but will not recede before the upcoming agricultural season. • Neither reducing the scope of the AIP (e.g., eliminating seed subsidies) nor circumventing the private sector to obtain fertilizers will reduce costs sufficiently to maintain current fertilizer subsidy levels, and could exacerbate the crisis. • Any near-term response will require making difficult choices about how to distribute the burden of rising prices by either reducing the number of beneficiaries, reducing the value of the subsidy, or increasing the burden on the Treasury. • In the long run, Malawi can reduce its vulnerability to global fertilizer price volatility by investing in infrastructure, improving fertilizer efficiency through research and extension, and identifying alternative strategies for improving Malawian land productivity.