Contract farming is widely promoted by multilateral agencies as an engine of economic growth in developing countries. The agencies often stress the need for governments to create strong farmers' organizations that can shoulder the risks associated with contractual relationships with large corporations. However, empirical studies of farmers' organizations in contractual schemes are few and tend to dismiss the performances of these organizations for not measuring up to donor expectations. This paper seeks to offer a more unbiased examination of what farmer's organizations actually do by recounting the development of out‐growers' associations in a contract farming scheme in central Tanzania. The paper explores the new space for social organization and business operations which emerged after privatization in 1998. It is argued that under certain conditions, out‐grower associations occupy a crucial position with regard to classic agrarian questions of land, labour and capital accumulation.