The Environmental Protection Agency and the powerful agriculture and chemical industries have squared off for a major showdown over whether toxaphene, the nation's most heavily used pesticide, should be pulled off the market for causing cancer in test animals.

The sheer size of the toxaphene business - more than 100 million pounds are produced annually and huge amounts are spread on crops and livestock in virtually every agricultural region in the United States - has propelled the clash into the superbowl category in the increasingly controversial area of federal pesticide control.

"Toxaphene," said an official of the American Farm Bureau, which is trying to rally some 2.5 million farm families to support the pesticide, "is the focus of the whole argument over the EPA's pesticide program because it's just about everywhere."

Toxaphene accounts for nearly one-fifth of all the pesticides used in the country, said the farm bureau official. Without it, he and other farm industry spokesmen claim, the nation's farmers will be cut off from the last large-scale pesticide left to fight hordes of marauding insects.

On the other side, EPA officials and supporting environmental organizations have charged that toxaphene's cancer-producing properties are so potent that in one test laboratory mice in every case developed tumors when they received substantial doses of the pesticide.

Some congressional and environmental observers are additionally concerned, as are some agency officials, that the toxaphene fight may show whether EPA can stand up to increasing pressure from the well-organized agriculture and chemical industry forces.

Since May when the EPA put toxaphene on its Rebuttable Presumption Against Registration (RPAR) list of pesticides it wishes to remove from the market, an unusually high number of formal responses has poured in. Of the more than 350 on the file at EPA most are clearly unfavorable - including about 40 letters from predominantly agricultural state congressmen.

Farmers' concerns have focused on the fact that with other major pesticides such as DDT, aldrin and dieldrin off the market for similar safety reasons a dwindling number of pest killers is left.

"EPA keeps banning these chemicals and telling us to use substitutes," said Edwin A. Jones, a 26-year-old corporate farm operator from Pahokee, Fla., who wrote the agency opposing the removal of toxaphene. "Well, we've just about run out of economical substitutes."

Farm Chemicals, a major industry trade publication, last month devoted seven pages to warning its readers of the dangers of the RPAR system and devoted much of the article to the toxaphene battle.

"Toxaphene users have a lot at stake," the magazine noted, adding that major users of the pesticide such as the cotton industry are worried about disastrous insect infestations if the compound is taken away.

Under the present timetable EPA could pull toxaphene off the market in about a year with provisions for the industry to appeal to the agency and then to the courts afterward.EPA, however, is seriously behind schedule on its RPAR program and agency officials expect the toxaphene struggle could drag on for some time.

A major challenge to the listing took place last week when the Hercules Corp., the biggest toxaphene producer, filed a 120-page rebuttal of EPA's RPAR listing for the pesticide.

The Wilmington, Del., firm, a chemical industry conglomerate with about $1.5 billion overall annual sales, mobilized a full corporate task force to rebut EPA's stand on toxaphene.

Its rebuttal is a broadside not only against listing toxaphene as a potential cancer-causing agent but also against the regulatory agency itself for sloppy workmanship and bias in its data compilation.

"The enormous benefits of toxaphene outweigh any conceivable hazard associated with its use," the company said.

The Hercules attack did not stop with EPA but challenged the laboratory studies done with the pesticide on mice as not necessarily applicable to humans. Mouse studies are a mainstay of virtually all testing done on suspected cancer-causing agents.

In a telephone interview last week Hercules officials maintained that there is an increasing divergence of opinion within the scientific community over whether mouse studies should be used to determine human carcinogenicity.

EPA's primary data for listing toxaphene on its RPAR roster was a test done for the National Cancer Institute showing the pesticide produced tumors in mice and rats.

In a "Toxaphene Position Document" issued in April EPA cited the testing as ample evidence for removing the pesticide from the market. The agency said additional studies showed that toxaphene had caused massive fish kills and that it was spreading widely through the environment.

The rebuttal charges that much of the NCI data was either inaccurate or misleading. Toxaphene, Hercules said, does not cause "unreasonable adverse effects" on the environment when used properly and does not build up with repeated applications.

In telephone interviews Hercules officials said they had found no indications that toxaphene was retained in any substantial amounts in man but rather that it does not appear to build up or cause cancer in humans.

The Hercules officials also said they did not know of any elevated cancer levels among farm workers that could be directly attributed to toxaphene exposure. In a 20-year-study of all but 6 per cent of those who have worked with the pesticide at Hercules' Brunswick, Ga., plant, one worker developed cancer, the company officials said.

The environment group said it had turned over the NCI test data for analysis to Dr. Adrian Gross, a senior research analyst with the U.S. Food and Drug Administration.

The Fund said that after reviewing the material Gross wrote: "I have never encountered an agent purposefully introduced into the environment . . . and to which many people would be exposed which had a carcinogenic propensity as clearly marked and as pervasive in two species of (laboratory) rodents as toxaphene."

Dr. Melvin Reuber, a researcher from the Frederick Cancer Research Center in Frederick, Md., who was hired by EPA to review the original NCI data, said last week that he found the laboratory data showed toxaphene to be even more potentially harmful than EPA's position statement indicated. Reuber said he agreed with Gross' assessment.

Ironically another comment submitted into the EPA files by a Texas researcher may render the entire controversy over toxaphene - and the pesticide itself - moot.

Dr. Frederick W. Plapp, an insect toxicologist at Texas A&M University, said his preliminary research on toxaphene indicates that it is no longer effective as a bug killer. The pesticide is generally sprayed with other compounds which conceal its loss of potency. Plapp saod.

Hercules officials said they were not aware of Plapp's work and denied their pesticide was no longer effective.

"The farm industry is generally pretty quick to catch onto these things," Plapp said in an interview. "But in this case I think the real issue is being confused and that the farmers are being used by the industry."