By Richa Naidu and Hilary Russ

SAN FRANCISCO/NEW YORK (Reuters) - Impossible Foods is no longer trying to win a coveted deal to supply McDonald's Corp with plant-based burgers, telling Reuters it cannot produce enough of its imitation meat to partner with the world's No. 1 fast-food chain.

It is the latest twist in the battle of imitation-meat makers hoping to convince more restaurants to offer their patties. But it was unclear how far talks had progressed with McDonald's, which declined to comment on the discussions.

Shares of Impossible rival Beyond Meat surged on Tuesday, closing 12.5% higher, after Reuters reported that Impossible was no longer in talks with McDonald's.

The stock had risen earlier in the day on Impossible's unveiling of its plant-based pork products at the International Consumer Electronics Show in Las Vegas on Monday, spurring further optimism about the sector.

Referring to McDonald's, Impossible Foods CEO Pat Brown told Reuters in an interview that "it would be stupid for us to be vying for them right now ... Having more big customers right now doesn't do us any good until we scale up production."

Impossible Foods and its rivals are duking it out over partnerships with fast-food chains to cash in on the roughly $3,500 per person average that Americans spend each year on food away from home.

The privately held, Silicon Valley-based Impossible Foods teamed up with Burger King last year to launch its soy-based Impossible Whopper in the United States. Impossible Foods is now working to more than double production instead of trying to win a deal the size of McDonald's, Brown said.

"I wish we had vastly more capacity than we do right now because the demand is high," he said. Impossible Foods said it had previously met with McDonald's but declined to disclose details about when it decided it would be unable to support a potential deal.

In late September, McDonald's launched a 12-week test of a P.L.T. burger in Canada, using patties made by Beyond Meat. But McDonald's has yet to offer a plant-based burger as a regular feature on its menu at any of its roughly 14,000 U.S. outlets.

"The P.L.T. is a craveable plant-based burger with a patty recipe that is made by McDonald's, for McDonald's," the fast-food chain said in a statement. It declined to provide any specifics on the results of the Canada test.

Beyond Meat told Reuters that talks with McDonald's are going "very well" and that its new and upcoming facilities around the world are guaranteed to help it keep up with demand - not just in the United States, but globally.