"If you looked at the number of mares in the country in 2006, a large number were aged over 15 so there has been a natural wastage of mares in the national herd," he said. "In early 2008 we organised a series of regional seminars explaining to breeders that unless they stopped breeding and concentrated on management they would lose money.
"It appears breeders listened and either culled mares or stopped breeding them."
However, Mr O'Dwyer admits there are others in the industry who believe foal production needs to drop even further.
"Some experts say the optimum number is 6,000-7,000 foals per year in order to make ours a really lean, fighting industry," said the ITBA man.
However, the fact remains that Ireland has a strong reputation internationally for producing thoroughbred foals.
Ireland produces 42pc of all thoroughbred foals in Europe and is the global market leader in this field. The superior quality of Irish foals is well known and is a direct result of the fact that most of the industry's major stallions are based here. The champion European sire in each of the past 18 years has been based in Ireland.
However, falling prize money is a direct threat to the future of the sector.
"Over the past 18 months the sector suffered a 25pc loss in funding," Mr O'Dwyer added. "Last month's budget included a 13pc, or €7m, cut in funding. That is a substantial hit and the impact of lower prize money trickles down to every level."
So what is this year's outlook?
"The major issue for the industry is that it needs to be properly funded," said Mr O'Dwyer. "Ultimately, the sector needs to be self-funding through the medium of a betting tax. A funding mechanism would keep prize money up and encourage people to stay in the sector. Good prize money is an incentive to have a horse in training."
Horse Racing Ireland CEO Brian Kavanagh maintains that this year will be a mixed bag.
"In 2009 we never had a better year on the track," he recalled. "Our prospects for 2010 look good; we had some strong two year olds last year."
"But on the business/ financial side, it's a question of survival in 2010," he admitted.
"Racing attendances have fallen by 15pc and the corporate race-goer sector has gone from flying to zero in the past three years.
"However, the autumn sales were not as bad as expected, although there were significantly reduced catalogues on offer," he added.
A significant date to judge the mood of the industry will be February 1, when trainers are due to renew their licences, Mr Kavanagh predicted.
"Trainers are struggling to get paid and we have lost some high profile trainers, such as Frances Crowley. There are more horses running in the trainer's name and more of them have a share or a leg in the horse," he said.
"At the end of the day, 2010 will be a case of battening down the hatches and we hope to return to a growth pattern in 2011. We have a very good product, with some of the best horses, horsemen and horsewomen and racing festivals in the world," he added.