The Queensland government says up to 30% of the banana crop in Australia goes to waste because it does not meet strict retail standards.
Supermarkets will not buy them if they are too big or if the skin is badly marked.
The ABC reports an estimated 10,000 tonnes of bananas are fed to stock, or mulched for spreading on farm paddocks.
Researchers are trying to find different uses for the bananas that the stores reject.
The CSIRO and Queensland's Department of Primary Industries are researching new processing methods. The project is also being partly funded by the Australian Banana Council.
Council chief executive Tony Heidrich says other countries are already making products like biofuels and banana flour.
Apple example
But he expects Australia will develop some new processed foods, as has already done by the apple industry.
He says apples on supermarkets nowadays have been peeled and sliced and put in special packaging to extend their shelf life.
"Apples are competing very strongly with snack foods on that basis."
Mr Heidrich is optimistic that any new banana food product would become popular in Australia.
"Because," he says, "every man, woman and child in Australia eats about 13.5kg of bananas every year."
