(Reuters) - Dutch food and chemicals group DSM and private U.S. ethanol maker POET, one of the biggest ethanol producers in the world, said on Monday they plan to produce ethanol on a commercial scale from corn crop residue such as husks and stalks.

The two companies announced a 50-50 joint venture, headquartered in Sioux Falls, South Dakota, that will have initial capital expenditure of $250 million and capacity of 20 million gallons in the first year, rising to about 25 million gallons a year.

"This is the next phase of development of biofuel. In that respect it is different," Feike Sijbesma, chief executive of DSM, told reporters on a conference call on Monday evening.

Last year, DSM said the development of second-generation biofuels was nearing a major breakthrough, with commercial production just a couple of years away, and that this could open up a market worth $5 billion a year.

"As the world is facing unprecedented challenges with a growing population making an ever bigger claim on the planet's resources, we need to accelerate the transition to a bio-based economy and this joint venture is a significant step in that direction," Sijbesma said in a statement.

DSM said it expects the venture to be profitable in 2014, the first full year of production, and to deliver substantial revenue with above-average earnings before interest, taxes, depreciation, and amortisation (EBITDA) in the medium to longer term.

Sales from the joint venture could exceed $200 million a year, the two companies said in a presentation. Sijbesma said the venture could generate between $80 million to $100 million a year, while licencing income could be worth "several tens of millions of dollars."

Second-generation biofuels are increasingly being seen as a preferred alternative to first-generation fuels, which drew criticism after sparking food inflation because they are made from food crops such as maize, sugar cane and rapeseed.

DSM is developing both yeast and enzyme products to convert cellulose from waste plant matter into sugar and then ethanol, which is used as a motor fuel.

It unveiled an enzyme technology last year that can improve the efficiency of biofuel production from second-generation sources, such as agricultural waste like wheat and corn stalks.

The two companies said that the global market for cellulosic ethanol is expected to grow to 18 billion gallons in the next decade, and to be worth about $50 billion. That in turn would result in a market of between $3 billion and $5 billion for enzymes and yeasts by 2022.

The Dutch company has transformed its business over the past couple of years, selling off its lower-margin bulk chemicals businesses to concentrate on less cyclical food ingredients and high-end plastics.

It bought U.S. baby food ingredients maker Martek for $1.1 billion in February 2011 and is the world's leading vitamin maker. With a war chest of more than 2 billion euros ($2.6 billion), it has repeatedly said it is on the lookout for suitable acquisitions. ($1 = 0.7665 euros)