Video of workers euthanasing piglets by slamming their heads on concrete floors or cutting their tails and teeth without pain relief were shown to inquiry members, along with a video appearing to show a worker performing a sex act on a pig confined to a sow pen.
Inquiry members members Bev McArthur, Renee Heath and Gaelle Broad from Victoria's Liberal and National parties stepped out during the screening.
Animals Australia counsel Shatha Hamade said industry codes of practice were not animal welfare standards and never had been.
"They were brought in to shield factory farming operators from what would otherwise be considered animal cruelty under established animal protection laws," she told the inquiry.
"Those codes are what permit us to do things like cut off tails, remove teeth and puts sows in stalls no bigger than their body."
Some inquiry members walked out of the hearing while footage of alleged animal cruelty was shown. (HANDOUT/THE TRANSPARENCY PROJECT)
The Australian Alliance for Animals, which is calling for new state and federal animal welfare bodies to oversee policy development and welfare standards, agreed codes of practice were a problem.
"The bludgeoning of piglets on concrete floors, the teeth clipping, the tail docking without pain relief, these are all practices that are permitted under our code of practice," alliance policy director Jed Goodfellow told the committee.
Responding to a question about how the covert footage that sparked the inquiry was obtained, Dr Goodfellow said the alliance did not condone trespassing on private property.
"However ... the footage and evidence that has come from recent investigations has been in the public interest," he said.
Chris Delforce from the Transparency Project, which secretly entered abattoirs and piggeries to film alleged welfare breaches, believed farmers cared for their animals and were ultimately being misled by the processing industry.
"As a farmer you can't go into a slaughterhouse and go look inside a gas chamber because these are enclosed boxes," Mr Delforce told the inquiry.
"They've been sending their pigs to these places and being told that their pigs are being given humane deaths and now they're seeing what that actually looks like, and they're disgusted by it."
Liberal MP Bev McArthur accused the group of trying to "kill" the meat livestock industry in Australia.
"You want to kill an industry, lets be clear about this," she said, and asked Mr Delforce if he understood biosecurity breaches at farms could lead to mass animal deaths.
"I understand that sending five million pigs to slaughter every year leads to mass animal deaths," Mr Delforce said.
The Australian Meat Industry Council announced on Monday video surveillance would become a mandatory requirement of its members' animal welfare certification.
Mr Delforce told the inquiry such CCTV footage from animal processing facilities should be made available to the public.
"Any member of the public can log in and see what's happening, (and) make up their own mind," he said.
"Or groups like us can then review that footage and if we see something happening then we can report it to the authorities and then we've got no reason to trespass."
A 30-year-old Carag Carag man has been charged in relation to the alleged bestiality incident and will appear at the Echuca Magistrates' Court on June 11, Victoria Police told AAP.