LEIGH SALES, PRESENTER: The Spring Racing Carnival this year has been dogged by claims of corruption and skulduggery, but there's another ugly underside to the so-called "sport of kings".

7.30 has obtained video of failed racehorses being shot for pet food, a fate suffered by thousands of horses around the country each year.

Guy Stayner reports, and a warning: this story contains images of horses being put down.

GUY STAYNER, REPORTER: The dust has hardly settled on the Spring Carnival and the images of Green Moon's Melbourne Cup victory and the Royal presentation will be replayed for decades.

But this is the video the industry would prefer you didn't see. Horses walking into the killing box for their meeting with the rifleman. This is Cup Week at the knackery.

WARD YOUNG, COALITION FOR THE PROTECTION OF RACEHORSES: The racing industry can't possibly stand up and say that they love these horses and then the next day when they can no longer earn money on them, send them to the knackery where they will receive a bullet in the head and be killed for dog meat.

GUY STAYNER: The shooting of horses at the Melbourne knackery was secretly filmed by animal activists. Industry insiders estimate 10,000 race horses a year are slaughtered. The majority are used for pet food and horse sales around the country are attended by meat buyers.

At the Echuca sales this month about 100 horses were sold at auction, including failed race horses.

JOHN MOYLE, AUCTIONEER: Lot's of those horses, contrary to what a lotta people think, actually go to homes and people will test their skills at educating them, breaking them in, using them as a kids' pony.

GUY STAYNER: The sales can still become a dumping ground for race horses. This obviously injured horse was listed for sale at Pakenham last week.

???: A lot of people just don't care. Like, they don't wanna put the money into fixing them.

GUY STAYNER: There were currently about 15,000 thoroughbred foals born every year. The industry calls the number of horses lost to racing each year "wastage".

Is the so-called issue of wastage a problem for racing?

HUGH WIRTH, RSPCA: A big, big problem and we don't know how bad it is, but we suspect it's very bad. We are breeding lots and lots and lots of horses. Some of them fall by the wayside for things that should never happen and that causes wastage.

GUY STAYNER: So is the racing industry breeding too many horses?

HUGH WIRTH: Absolutely.

GUY STAYNER: While the Clydesdale cross can sell for thousands of dollars in the main ring, race horses in the rear saleyards only fetch a couple of hundred.

RACHEL BEATSON, HORSE RIDER: The breeder came up to me and had a chat to me and he said, "She raced a week ago in Wodonga and came 1,400 metres behind last place." She's pretty slow. She's not born to be a race horse.

GUY STAYNER: Not fast, but this horse was very lucky.

RACHEL BEATSON: I knew I had to take her home. She was just gorgeous.

GUY STAYNER: What would've happened to this horse if you hadn't have ... ?

RACHEL BEATSON: Dog meat. The dog meat man was bidding against me and I just - I said, "I'm gonna keep going so you might as well stop, buddy." Yeah.

GUY STAYNER: So what did she cost you?

RACHEL BEATSON: $300. Not much at all.

GUY STAYNER: But finding a new home for a thoroughbred is easier said than done. They cost between $50 and $100 a week to keep and are often difficult to handle.

BILL SAUNDERS, HORSE TRAINER: A lot of horses are quite frazzled by racing and you find that they quite often need two or three months just to sort of come down out of the clouds and eat some grass and generally get used to being a horse again.

GUY STAYNER: Bill Saunders runs a race horse retraining program west of Melbourne. He's found new homes for 50 former race horses in the past two years.

BILL SAUNDERS: Some of them are quite badly injured or, you know, really difficult in the head in terms of being quite mad, and those horses are probably better off put down. But of the ones that are left, there are many, many that are very suitable riding horses and of course many of them do go out and do exactly that.

GUY STAYNER: While it's difficult enough to rehome a race horse, about a third never even reach the track.

HUGH WIRTH: Something like 8,500 horses at an early age are excluded from the racing industry. Usually due to injury - mostly due to injury. Mostly due to the fact that they were prepared for racing when they were juveniles and not mature in bone and limb. That's the big problem for the racing industry.

WARD YOUNG: The racing industry needs to realise that by breeding these animals and by profiting from them while they're racing and having those sort of benefits, they owe a responsibility to that animal to look after it for its entire life, not just its life while racing.

GUY STAYNER: Racing Victoria admits there is room for improvement and is considering an owners' levy as part of a new strategic plan on race horse welfare.

BILL SAUNDERS: We have many owners here who've actually been prepared to pay money to get their horses retrained in order to give them a good home. Unfortunately it's not as widespread as I would like it to be.

RACHEL BEATSON: (To horse) We're gonna be buddies, we're gonna be buddies.

LEIGH SALES: Guy Stayner reporting.