Foal with dry skin

Yes, it's because his diet isn't right for him in some way. Put him on a decent balancer for young horses; D & H Suregrow is favourite which will give him all the vitamins and minerals a growing horse needs. You can also add sugar beet of some form with brewers yest which is a good digestion aid which will help a lot with skin and hoof condition plus micronized linseed; good hay/haylage and decent turnout will also help but good skin comes from a good diet.

You only feed a couple of cups a day so it doesn't overload the system and contrary to what some say, the Suregrow is for all types of horses, not just TBs and the bonus is it's far cheaper than any other balancer on the market. Ring them, they're very helpful. http://www.dodsonandhorrell.com/product/suregrow

PS: I'm assuming he's been wormed properly of course which can be another sign of unthriftiness.
 
The dry flakey skin can be the final remainder of the lice. A good bath with Nizoral will help clear the flakey skin, then ensure as Maefen says the foal is receiving suitable food. Linseed or Copra will help improve his skin from inside.
 
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