The Yellow Sheet, a daily listing of the sales in the meat industry that is used to set meat prices by up to 90 percent of the industry, is prone to manipulation that may be costing consumers millions of dollars each year. At the same time it is leaving small businessmen at the mercy of chain stores, according to a congressional investigation.

Testimony of an investigator for the House Committee on Small Business before one of its subcommittees yesterday revealed that from 67 to 88 percent of all prices reported by the Yellow Sheet, and used by the industry to set prices that day, were "unsupported by work papers."

The daily Yellow Sheet is supposed to reflect an average of the latest trades or transactions in the meat business, and is used by up to 90 percent of meat traders as a benchmark for the going price of a meat. According to committee investigator Nick Wultich, "the greatest portion of the unsupported prices were in the category where they had prices based on not trades at all."

Wultich said that from 58 to about 86 percent of the reported trade prices he checked were not supported with any apparant documentation.

In Chicago, Lester I. Norton, president of the firm that publishes the Yellow Sheet, called Wultich's allegations "the most singularly stupid stuff I ever heard."

He said his staff of 12 reporters man telephones daily gathering current prices.

According to committee Chairman Neal Smith (D-Iowa), "prices reported by The Yellow Sheet were at times based solely on the judgement of a select few within the organization, rather than by the actual compilation of the day's trading."

"There is no question in my mind," said Smith, "that this type of price reporting system leaves ample room for manipulation."

Calling the results of his committee's investigation of the meat-pricing situation "appalling, with widespread significancce for the entire meat industry," Smith said he feared the insustry was now "about as far from the auction block and free market system of transaction in this industry as we can get."

Smith said chain stores now control such a large share of the retail meat market, "that apparently (under this system) they can set the terms for buying that govern the entire industry."

In this report, Wultich told the sub-committee that he has found "a litany of complaints about the market, especially the pricing aspect . . . from both buyers and sellers."

But, Wultich said, many people in the industry refused to testify about their fears of possible price manipulation "because it would mark them within the industry and have an adverse affect on their sources of supply and/ or customers.

"However," he added, "they all showed a desire to see something done and a willingness to cooperate." He said some did agree to testify in closed hearings or sign statements.

"They are convinced," Wultich said, "that the prices reported on the Yellow Sheet are not representative of the market and some strongly suspect that the market is being manipulated to the detriment of small business."

The Yellow Sheet is published by the National Provisioner, a Chicago-based trade publication. It claims to be a reporting service. In some of its promotional literature, it states:

"The Yellow Sheet is the meat industry's recognized price guide . . . time-tested for accuracy, timeliness and unbiased reporting of what others are getting when they sell meats in the open market."

According to another witness, Deven Scott, executive director of the New England Wholesale Meat Dealers Association, the Yellow Sheet prices "are either manipulated or controlled by a group of packers or individual packers with sufficient purchasing power to create the illusion of a stabilized market when prices are falling, or a weak market when Prices are rising."

Scott contended that a big enough supplier could manage to get an inflated sales figure published, which would cause others in the industry to buy from him at an unrealistically high price.

On the other hand, a large buyer might be able to influence publication of a false low price that would allow him to purchase for less than real market value.

In any case, according to a committee spokesman, "the consumer loses by paying thehighest price in every case."