Fonterra has the capacity to spend almost A$2 billion ($2.4 billion) on an acquisition in Australia, the Australian Financial Review reported, citing chief executive Andrew Ferrier.
The co-operative has "always been interested in a big one", Ferrier said.
Last year, Fonterra was outbid by San Miguel for Australia's National Foods.
Ferrier was non-committal about whether he is interested in Dairy Farmers Australia, which the newspaper said was being restructured for a listing on the Australian Stock Exchange in 18 months.
Fonterra's Australian unit was close to reaching the company's target of 10 per cent annual sales and earnings growth, Ferrier said.
