(Bloomberg) -- Turmoil in farm country caused by flooding and cold weather stands to give makers of large agricultural equipment Deere & Co. and Agco Corp. a boost, a Jefferies analyst said.

Poor crop production issues and growth in global demand for ethanol should lift prices for corn and other crops, improving agriculture markets for the next two or three years. That in turn should trigger an upgrade and replacement cycle for large agricultural equipment, analyst Stephen Volkmann writes.

"The seeds of a farm recovery have been sown," Volkmann said, "But first, there will be pain."

The unseasonable weather has limited planting, and 2019 will be a weak year for farmers and not so good for sales of equipment sales either. However, "the good news is that insurance and other government payments will largely make them whole, while giving them a chance to sell out old inventory at higher prices."

Jefferies boosted its rating on Deere to buy for the first time since 2011, according to Bloomberg data. The firm also turned bullish on Agco, with a Street-high target on both. Shares of the equipment makers climbed, with Agco hitting an all-time high.

Deere is the largest and "highest-quality play" on the turning farm-cycle theme. Deere derives 29% of sales from large agriculture equipment, one segment of the market that stands to see higher volume in the early days of the replacement cycle, Volkmann said.

Agco is positioned to benefit from a recovery in equipment sales in North America and South America, which account for about a third of sales, according to Bloomberg data. Volkmann sees grain markets as more balanced for the next few years, following a period of global oversupply.

--With assistance from Ryan Vlastelica.

To contact the reporter on this story: Crystal Kim in New York at ckim426@bloomberg.net

To contact the editors responsible for this story: Brad Olesen at bolesen3@bloomberg.net, Will Daley

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