By Hallie Gu and Dominique Patton

BEIJING (Reuters) – New Hope Group, one of China’s biggest pig breeders, expects the country’s hog output to recover from last year’s disease epidemic by 2021, while prices will start to fall after a rush of new entrants into pig farming, chairman Liu Yonghao said on Monday.

The fatal pig disease African swine fever reduced China’s huge hog herd by around half last year, but the government has offered incentives to farmers to spur a recovery.

Liu said prices for pork, China’s favourite meat, will remain relatively high this year, but could fall below production costs in the coming years as new players, including real estate and internet companies, turn to farming.

“These companies, with big money, usually invest a lot. On the one hand, they can push the development of pig farming rapidly,” Liu said in an online briefing with reporters. “On the other hand, it will definitely lead to oversupply and finally, push prices below production cost.”

Liu did not name any of the new players.

China Vanke Co Ltd, one of China’s top real estate companies, has advertised for managers for a pig farming unit on its recruitment application.

It has not made public its plans for the business and could not be reached for immediate comment.

Established pig producers are also expanding rapidly, including New Hope’s pig breeding business New Hope Liuhe.

The company sold 3.6 million pigs in 2019 and plans to produce 15 million by 2021 and 25 million in 2022. It will slaughter 8 million this year, a company official said on Monday.

Liu said Liuhe is well-positioned to cope with low prices as its production costs are as little as 11 yuan per kilogramme for some of its farms.

Liu said pork prices, which have been in steady decline since early February, will fall until later this year, pressured by increased production and a surge in imports.

Retail prices for pork touched nearly 60 yuan in early November 2019 and again in February when slaughterhouses closed during the peak of China’s COVID-19 epidemic.

But live hog prices have dropped 30% in the last three months. Last week, they dipped below 30 yuan per kg for the first time since October, as pigs that had been raised to heavier weights than normal when processors were shut during February and March went to slaughter.

Weak consumption is also pressuring prices, analysts say, as many school and workplace canteens are still closed.

Liu also said New Hope will continue to invest in food and farming in Australia, despite a souring of ties between the two.

China has suspended beef imports from four of Australia’s largest meat processors, one of which New Hope owns.

(Reporting by Hallie Gu and Dominique Patton; editing by Louise Heavens, Jane Merriman and Barbara Lewis)