In recent decades contract farming as a mechanism that integrates and subordinates agricultural production to export oriented agribusiness has expanded in Third World countries. In Mexico contract farming dominates the production of horticultural crops for processing and export. It is also used for barley and to grow some varieties of wheat for Cargill. The contract farming labour agreement represents an institution that links local and global processes where agribusiness is the key actor that integrates local farmers to national and world markets. The purpose of this paper is to analyse the implications of contract farming for productive relations by examining its impact upon farmers and firms. The study found that despite the disadvantages of contract farming for growers, and the disproportional risks born by producers, they enter into contract farming labour agreements because they lack alternatives for financing, technical assistance and access to markets. The experience of contract farming in Mexico and several Third World countries shows that its growth is related to the implementation of neo-liberal policies that are accompanied by the withdrawal of state support and regulation of agricultural production. In this context, contract farming represents a livelihood strategy for many Mexican growers.