UPDATE 3-VeraSun stops processing at some ethanol plants

*VeraSun stops processing at "certain" plants

*Analyst says does not expect closings across industry

*VeraSun says will need to reject some corn contracts (Adds details about contracts, paragraph 6)

By Timothy Gardner

NEW YORK, Nov 21 (Reuters) - Bankrupt U.S. ethanol maker VeraSun Energy Corp VSUNQ.OB said on Friday it has stopped receiving and processing corn at "certain" of its plants while it seeks additional financing.

The company, the largest publicly traded U.S. producer of the alternative motor fuel, has "temporarily ceased receiving corn and processing at certain facilities while we seek to secure additional financing," it said in a release.

The South Dakota-based company has 16 ethanol plants across the Midwest. VeraSun did not immediately return calls seeking comment on which plants had ceased processing.

Earlier on Friday, the president of the Iowa Corn Growers Association said that VeraSun's 110-million-gallons-per-year Dyersville, Iowa, plant had stopped receiving corn.

VeraSun went bankrupt on Oct. 31 under pressure from expensive corn contracts and the credit crunch. On Thursday, it posted a third quarter net loss of $476.1 million versus net income of $7.8 million in the year-ago quarter.

The company said on Friday it has paid or will "substantially" pay for corn delivered in the 20 days before it went bankrupt and corn delivered since.

Ron Oster, an analyst at BroadPoint Capital in St. Louis, said VeraSun's processing shutdowns were mostly the result of losses from its expensive corn hedging decisions and not a sign that wide swaths of the ethanol industry would follow suit.

Still, U.S. ethanol producers are plagued by low profit margins as gasoline prices have plummeted. Prices for gasoline at the pump dropped below $2 a gallon on Friday to the lowest level since March 2005 on global economic difficulties, according to the travel group AAA.

"It remains a very difficult operating environment and we expect these narrow margins to persist through 2009," Oster said.

VeraSun said it will need to reject some corn contracts for delivery through the end of the year at its Janesville and Welcome refineries, both in Minnesota, due to delayed start-ups that had been announced earlier. Both of those plants were slated to produce 110 million gallons per year of ethanol.

"Other contracts may need to be rejected or renegotiated as we continue to work through them on an individual basis," the company said in the release. (Editing by Jim Marshall)