A new report has infused fear into the province's horse racing industry just as a crucial yearling sale takes place at the Woodbine Sales Pavilion.

A panel has found that if the industry falls apart next year when the government pulls out of its slots partnership with racetracks, up to 13,000 horses would have to be euthanized. The panel says that thousands of jobs would be lost.

The report has made the industry very nervous and the Canadian-Bred Yearling Sale is seen as a test on the future of horse racing in Ontario.

Glenn Sikura, president of the Canadian Thoroughbred Horse Society, says Monday's results were "guarded at best."

On the first day of the auction, Sikura says prices were down 36 per cent on average. The numbers haven't been crunched yet for Tuesday's auction, but there was at least one good news story - one horse sold for $275,000, which is a number the auction hasn't seen in a few years.

To Sikura and others within the industry, the uncertainty being felt right now is devastating. Breeders, owners and trainers are not only worried about their livelihood.

"I mean, these are our kids," Sikura says. "We spend a lot of time raising these animals. We spend a lot of time caring for them."

Bonnie Rowntree, who operates Willow Ridge farm near Durham, sold her first of five horses on Monday night for $15,000. She says a year ago, the horse was worth $30,000. The sale can't be called a success, but she is staying optimistic.

"We were satisfied because of this economy," Rowntree says. "We were satisfied because she sold."

She and Sikura both say they still have hope for the industry thanks partly to another part of the report that emphasized how vital horse racing is for Ontario's economy.

"The government, I believe, will come to its senses and believe what the hired panel said and do the right thing, and keep us going," Rowntree says.

A report released by the Ministry of Finance last week suggests that Ontario's 17 racetracks should be narrowed down to five or seven.

Sikura says that's not the solution.

"There needs to be alternative forms of gaming at racetracks," he says.

Sikura would like the government to sit down with all the players and find a solution, something he says he thinks will happen soon.