A state court ruling that low levels of PBBs are not toxic to farm animals has added fuel to Michigan's five-year-old controversy over polybrominated biphenyls, a fire retardant chemical.

The opinion, released yesterday, comes after tens of thousands of dairy cows and more than 1 million other farm animals were destroyed and buried in what has been called the worst manmade agricultural disaster in U.S. history.

But instead of settling the issue, the long-awaited ruling by Wexford County Circuit Court Judge William Peterson has stirred new passions by saying that many of the animals were slaughtered needlessly because of public fears aroused by a few "incompetent and dishonest" scientists, farmers, veterinarians and lawyers trying to capitalize on the disaster.

Peterson's 177-page opinion, the full text of which was released yesterday, was the result of the longest trial in state history, in which 63 vitnesses from as far away as the Netherlands testified. The trial transcript ran 25,000 pages, with exhibit taking up an additional 70,000 pages. The trial began in February 1977 and thus far it is the only case arising out of the PBB contamination to be adjudicated. More than 100 other suits are pending.

The disaster began in 1973 when Farm Bureau Services, a farmers' co-op, unknowingly blended in some dairy feed PBBs accidentally shipped by Michigan Chemical Corp.

Many animals exposed to large amounts of PBB sickened and died, but not before they passed the chemical on to consumers through the food chain.

Many feed mix-up went undetected until May 1974. By then, 90 percent on Michigan's 9 million residents had been exposed to PBB and now carry the chemical in their blood and fat tissue.

Some scientists fear PBB is cancer-causing because it belongs to a group of chemicals called halogenated aromatic hydrocarbons. Every one tested to date was carcinogenic. Research to test PBB carcinogenkity is under way at the National Cancer Institute.

The issue before Peterson dealth solely with PBB's effects on dairy cows, particularly those belonging to Roy Tacoma, a dairyman from Falmouth.

Tacoma never bought the heavily contaminated feeds. But in a $250,000 civil suit, he claimed his herd was ireparably damaged after he unknowingly gave his cows feed contaminated by low co-op's mixing equipment.

Tacoma said he lost 199 cows; he shot 115 of them.

After the feed mix-up came to light, the chemical and co-op companies involved admitted responsibility and ultimately paid some $40 million to settle about 500 claims out of court. But in those cases the farmers had reasonably clear-cut cases: their animals had levels of PBB well exceeding the Food and Drug Administration's guidelines.

But the companies balked when other farmers, such as Tacoma, demanded settlements, claiming that even cows containing PBB levels below FDA guideliness were sick and dying. The companies said PBB at such low levels does not hurt animals.

Tacoma is among the owners of these so-called low-level herds. Earlier he had spurned a settlement offer of rougly 10 percent of his claim.

His argument was that low PBB exposure is more damaging in the long run than short-term high-level exposure. Moreover, he argued that just because his animals now have low PBB levels does not mean they were not exposed to much higher levels.

The reason they were not tested is because Tacoma, and many others were told by Farm Bureau Services that their feed was not PBB-tainted, despite evidence suggesting the contrary.

Peterson said in his ruling that undisputed defense evidence showed that farm animals exposed to far higher PBB levels than those of Tacoma's animals had suffered no ill effects.

"What did happen to cattle who ingested PBB?" he asked. "To most of them the answer is 'nothing than can be attributed to PBB.'"

He said the evidence "has disclosed a tragic picture . . . but not the picture of thousands of animals being destroyed; it is a picture of animal being destroyed indiscriminatly, many unnecessarily."

He added that the co-op and Michigan Chemical Corp. contributed to an atompshere in which "fear preempted the role of reason" with a settlement policy that "permitted such an indiscrimniate slaughter of Michigan dairy animals without attempting to distinguish between animals that were exposed to feeds containing PBB and those that were not, or between animals exposed to insignificant levels and those which . . . received larger amounts of PBB."

The judge, a former president of the Michigan Judges Association, said "rumor and exaggeration feed on themselves, nourished by fear and the self-justification of people with potential claims. Nothing could better illustrate that than this case, where professionals have forsaken objectivity and their usual standards of inquirty to accept unquestioningly, as a basis of their expressed opinions, reported facts that were not factual, and to embroider upon their own role to the extent of being untruthful."

Attorneys representing Tacoma and others said they will appeal Peterson's ruling but are still reviewing his lengthy opinion.

Meanwhile, farmers calling themselves the PBB Action Committee have announced the formation of a "legal defense fund" to help defray the cost of Tacoma's appeal. Pat Miller, a group spokeswoman, said the nationwide campaign also was spurred in part because Peterson ordered Tacoma to pay court costs, estimated by the judge to be about $16,000 to $20,000.