The 21-year-old lefthander is being sent for surgery instead.
The Yankees announced Tuesday afternoon that Banuelos, shut down with elbow soreness in May after going 0-2 with a 4.50 ERA in six starts with Triple-A Scranton, will undergo Tommy John surgery Thursday in Pensacola, Fla. Dr. James Andrews will perform the surgery, which is expected to keep Banuelos out for the entire 2013 season.
"It's not what you want to see out of your young players that you think have a bright future for you," Joe Girardi said. "But a lot of guys have had setbacks and went on to have great careers, so he has an opportunity to heal up, get strong and be a factor after that. I'm sure it's frustrating for him, it's frustrating for us, but you have to make the most of it."
The news was another potential blow to managing general partner Hal Steinbrenner's plan to cut payroll from the current neighborhood of $200 million down to $189 million by 2014 to avoid a stiff luxury tax penalty.
Among the arms he mentioned that day were those belonging to Ivan Nova, Michael Pineda and Phil Hughes - all of whom were expected to be in the 2012 rotation - and minor-league prospects Dellin Betances, Manny Banuelos, Adam Warren, David Phelps and D.J. Mitchell.
Pineda never threw a regular-season pitch as he underwent season-ending shoulder surgery in May. Hughes has been solid but not spectacular and Nova, after a good first half, imploded in the second half and was yanked from Tuesday night's start in favor of Phelps, a rookie.
As for the minor leaguers, Phelps unquestionably has been very good - called a "pleasant surprise" Monday by Steinbrenner - but that's been it. Warren had a decent but not great year in the minors and was shelled in his one spot-start this season. Betances started the season in Triple-A but struggled with his command and was demoted to Double-A.
Mitchell's greatest contribution was being part of the July trade that brought Ichiro Suzuki to the Yankees.
"We'll see how these young kids, Betances, Banuelos, those kids, we'll see how they perform toward the end of this year, this year and into next year," Steinbrenner said in March. "They're going to play a big part of that. The young kids are going to play a big part of being able to lower this payroll."
So far, it has not gone according to plan.