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Only when they level off will you know if they are good or not. A horse with low PT or inconsistent may end up at the top of it's class and do really well. Horses with under 9 PT I cull but otherwise I keep most of them. I sometimes cull by points this year if they have levelled off.
If you can't keep them all keep the pretty ones :P

I keep every foal I breed, either as a breeder or shower.

Twards the end of the month I go through my show horses. I start at the oldest and work my way down to 10 or 11, depending on when they level off. So age 17 I search them by total number of points, and cull the ones that are obviously lower than every one else. Then I sort that age group by points earned this game year, and cull the ones who haven’t earned anything or very little (if they have over 600 total points I usually don’t cull them even if they aren’t earning any more) I go through every age group this way. Then I’ll look at the lowest pointed horse I’m keeping at age 10 and go look at the lowest pointed horse at age 11. The 11yr horse should have more points that the 10yr old horse. If it doesn’t that one gets culled as well (unless they are now earning a lot of points 30+ In the game year) I go up the age range culling the older ones like this. This is why I do most of my culling twards the end of the game year, that way I can see how much they are currently earning in showes. When I give a horse a second chance before culling them I put it in their notes along with what year it is, if they’re still doing badly the next year then they’ll go. Once you’ve done it awhile you get a pretty good feel for how many points a horse should have by a certain age, like for me by age 10 the lowest pointed horses should have at least 260 points.

First things first - if a horse tests as inconsistent it's culled. This is solely a personal preference, as inconsistent horses can perform as well as their consistent brethren, but I don't like seeing showing scores fluctuate a lot. I can't explain it - it just makes some weird part of my brain unhappy. But at least it's an easy way for me to cut down on the show herd!

Any show pony under 10 PT is culled. Since I've been sort on space the last few months, most horses under 11 PT are also culled. I do keep a few between 10-11 PT if they are particularly pretty, though. They get put up for sale for 3k to see if anyone else wants them. If they don't sell in 3 months, then I just take them off the market and keep them.

Then my show ponies sit until they are 10 years old. Once they hit ten, I start checking to see how they're leveling off. Do they have a decent amount of points for their age? Have they leveled off? Where are they ending up in their classes? If things are looking grim - not many points, leveled off already and showing in the bottom of their classes - they get public auctioned.

I stop checking on horses once they hit 15 or so. At that point the cash-out the public auction gives isn't much of an advantage over just keeping them for a few more months. Also, I'm usually pretty attached to them since they've managed to stick around for so long. ;)

I don't know if this is the best way to do this. My show bonus grows steadily, but slowly. There might be ways to grow it faster, but I kept running out of room!! Things are getting a little better since the over-10-auction-payout change, though. I'm hoping in the future I can keep more horses under the 11 PT mark.

Anyway, hope that helps!