Westpac expects Fonterra to make a payout of $7.10 a kilogramme of milk solids for the 2008-09 season.
The bank also expects a 9% increase in dairy production.
Fonterra's opening forecast is $7, compared with $7.90 last season.
Westpac senior economist Doug Steel says a tango between commodity prices and the New Zealand dollar could constrain Fonterra's milk payout for the 2008-09 season.
He says the falling New Zealand dollar and a drop in international commodity prices appear to be keeping the payout constant.
He also expects a 9% increase in dairy production this season.
That combined with the milk solids payout means the total income for all dairy farmers should be just under last season's $10 billion.