Montreal, Canada

This morning’s crop progress report from Bill Gary’s Grain Insight (www.cis-okc.com) isn’t pretty. With the exception of winter wheat, every crop is behind last year’s planting schedule and in some cases, several crops are projected to yield the smallest harvests in more than two decades.

Crop damage is spreading across the United States and Canada. That means the potential for a big price burst is growing as farmers complete their planting season this month; parts of the United States’ grain belt are either flooded or parched.

Over the last four years an acceleration of violent weather patterns, mostly tied to global warming and climate change, has caused havoc to most grain-growing belts around the world. Scientists can’t explain exactly why weather patterns are fluctuating violently recently but the net result is sharply lower crop production, falling water tables and parched or flooded lands.

Combined with growing demand and government policies in some countries making a bad situation even worse (ethanol subsidies, grain-hoarding), prices are up sharply since mid-2010 and poised to super-spike this summer, unless Mother Nature comes to the rescue.

Winter wheat conditions have improved year-over-year in only three states – Illinois, Arkansas and Missouri. Hard red wheat, the most popular form of wheat used for human consumption (e.g. breads), has witnessed a plunge in quality conditions compared to 12 months earlier; Colorado, Kansas, Nebraska, Oklahoma and Texas all reported declines of 24% to 70% year-over-year.

Meanwhile, plantings for other crops are also sharply lower.

Oats, cotton, sorghum, rice and spring wheat are all down versus last year and portend to some big gains for the complex as we approach the summer.

Unless harvests in Russia, Latin America and Australia make up for the decline in U.S. and Canadian production , it looks increasingly likely that we’re headed for another shortfall in global grain output in 2011.