Synlait has announced a new partnership with US baby products manufacturer Munchkin that could offer its 161 farmer suppliers a chance to earn well above the normal payout.

Munchkin, a privately held Californian company known for designing, manufacturing, and distributing innovative infant and toddler products, is planning to launch a new Grass Fed branded retail-ready infant formula into the United States and China that will be manufactured exclusively by Synlait.

Synlait managing director John Penno said the partnership would help the dairy processor reduce its exposure to China.

"We are cognisant of ensuring our infant formula business does not become overly reliant on the China market, and so Munchkin, with its focus on the United States market, is a potentially important addition to our growing portfolio of retail-ready infant formula customers."

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The raw milk used to manufacture the unique infant formula is subject to a new Grass Fed standard which requires cows to be exclusively grazed on a pasture and crop-based diet, with no grain feeding or feed not grown in New Zealand.

Synlait is looking for up to 25 suppliers to join the Grass Fed standard. The carrot is a premium for their milk, above the $5.50 per kg of milk solids the company has forecast as its farmgate milk price for next season.

Synlait won't reveal what that premium for Grass Fed will be but it's expected to top the existing range of premium earning options it provides farmers which include A2 milk, Immuron Colostrum and its best practice dairy farming programme, Lead with Pride. It doesn't reveal what premiums are paid for A2 or Immuron although it does for Lead with Pride. Farmers on the internationally recognised 1SO 65 dairy farm assurance programme are split into two bands, with Gold-Plus accredited farmers receiving an extra 6c/kgMS and Gold-Elite an extra 12c. Only one supplier has made Gold-Elite status to date.

Penno said the company's focus was on ensuring it continues to provide its milk suppliers with opportunities to earn more for their milk.

Synlait Milk's shares closed up 3c yesterday at $2.52.