Most sectors of Scottish farming have been suffering depressed commodity prices for some time. Low or non-existent profits coupled with lengthy delays in receiving the all-important Basic Payments from the Scottish Government have stretched some farm businesses to their financial limit.

The extent of the financial difficulties many farmers are in was illustrated last summer by tales of contractors cutting silage for customers who hadn't managed to pay for the previous year's work. Those in the know around the rings of livestock marts gossip about struggling dairy farmers having to sell off cows to pay for their next feed delivery.

Indeed, it is the dairy sector that appears to be suffering the most pain as a result of the global over-production of milk at a time of reduced demand - particularly from China.

Having said that, there are many farmers making good profits as a result of being fortunate enough to have milk contracts aligned to supermarkets that pay 28p per litre (ppl) or more for their milk. At the other end of the scale are those selling milk for around 14ppl. That price difference is worth about £140,000/annum to a typical herd producing 1m litres. How can it be right for someone to get £140,000/annum more for producing the same milk from similar cows on a similar system as his neighbour?

Sadly, it's currently impossible for those on low-priced contracts to switch to a buyer offering a higher price. Indeed, the current market for milk is so dire that many are grateful simply to have someone prepared to buy their milk. With the global price of dairy products declining, milk buyers have been forced into another round of price reductions, and there is now little hope of any improvement till much later this year.

Mind you, quite a few dairy farmers have only themselves to blame for the precarious financial predicament they find themselves in. They over-borrowed to fund expansion in the good times. That proved to be a good strategy when big profits were easily made, because investing in more land, buildings, equipment and livestock helped reduce tax liabilities and increase net worth. Now that milk prices have tumbled they find they have borrowings escalating to the point that could force some out of business.

It's not just dairy farmers who are struggling. Beef and sheep producers have had to cope with reduced returns, and arable farmers have also seen grain prices tumble. For instance, feed wheat is worth about half of what it was fetching just a few years ago. Despite that good news for users of feed grains, many pig producers are hanging on by their finger nails, and there will be casualties.

Many in the industry are predicting an increase in the number of farms for sale this summer as a result of pressure from the banks and those older farmers without successors taking the opportunity of record land values to exit the industry.

According to land agents Savills, about 40 per cent of farmers last year cited retirement as the main reason for selling up, while 30 per cent cited debts - the highest level for many years.

An increase in the supply of land for sale and low commodity prices making farming less profitable are putting pressure on farmland values. Figures vary between agents but point to a slow down at best.

For instance, land agent Knight Frank reckons that farmland values have not only slowed, but actually started to fall. According to them, the average value of bare agricultural land in Scotland fell 1.5 per cent to £4,366/acre in the second half of last year compared with the first six months.

If land values start to slide this summer it could trigger the bursting of the balloon. For most of my life land, if you could afford to buy it, has proved to be a sound investment and in recent years has regularly outperformed all other investments. It is high land values that have underpinned the borrowings of those who over-expanded, but bankers nervously watching the title deeds they hold as security shrink in value will become increasingly jittery.

Tenant farmers may not have had the ability to borrow the huge sums of money that owner-occupiers can, but their low capital base makes them even more vulnerable to bank pressure, if they have overdrafts spiralling out of control.

Difficult times lie ahead.