Free Range 180 farmers will receive 3p to 4p per litre above the price they are currently paid.
Founding farmer Peter Crawford said this would equate to an additional £30 – £40,000 each year for every 1 million litres sold.
The co-operative concept is based upon members grazing their cows outside at grass for a period of six months or, 180 days.
Free Range 180 will be offered across three sections of whole milk, semi-skimmed and skimmed varieties with the brand being processed by County Durham-based Lanchester Dairies.
Producers will have to adhere to strict animal welfare rules and there will also be quality assurance through the Red Tractor logo according to Mr Crawford.
He said: “Consumers are very conscious as to how farm animals are maintained and where and how milk is produced. They want to know animals lead a healthy and comfortable life and are able to graze freely in a natural environment.
"Our aims are to connect with consumers and establish a premium milk brand that members of the public trust on numerous levels."