Fonterra may have to fork out $64 million to Australian farmers, but it's also an opportunity for the dairy giant to dominate the market.

It is the second largest player in Australia. Its rival Murray Goulburn has had a meltdown and after a backlash has increased its average milk price paid to farmers for 2015/ 16 season.

ASB senior rural economist Nathan Penny told Mike Hosking under an agreement Fonterra has to match the price.

"It may have to foot a bill in this case of some degree, but they've got a massive opportunity and they can really increase their supply base in Australia and look with a view to make their Australian business much more profitable."

LISTEN AS NATHAN PENNY SPEAKS WITH MIKE HOSKING ABOVE