UPDATE 2-Deere profit beats on strong farm equipment demand, shares jump

* Sees FY 2017 equipment sales up 9 pct, from up 4 pct previously

* Sees FY 2017 profit of about $2 bln, up from $1.5 bln

* Q2 profit $1.94/shr vs est $1.68 (Adds details, background, updates shares)

May 19 (Reuters) - Deere & Co reported a bigger-than-expected quarterly profit, as sales rose for the first time in more than three years on improving demand for its farm and construction equipment, sending its shares up 7 percent.

The U.S. farm equipment maker also raised it fiscal 2017 equipment sales growth forecast to 9 percent, from its previous forecast of 4 percent.

Deere said it now expects fiscal 2017 net income attributable to the company to be about $2 billion, up from $1.5 billion estimated previously.

The company's sales had taken a hit as bumper corn and soybeans harvests drove down prices, leaving farmers with less cash to spend on equipment.

To cope with the slump, Deere cut jobs and lowered production of its trademark green tractors and harvesting combines.

Higher shipment volumes and improved pricing and product mix along with cost cuts helped the company beat profit estimates for the second quarter ended April 30.

"We are seeing modestly higher overall demand for our products, with farm machinery sales in South America experiencing a strong recovery," Chief executive Samuel Allen said in a statement.

Deere said it expected fiscal 2017 industry sales of tractors and combined harvesters in South America to increase 20 percent, up from its previous forecast of about 15-20 percent rise, due to improving economic and political conditions in Brazil and Argentina.

Latin America is Deere's third-biggest market, accounting for about 9 percent of its total equipment sales.

The company also raised it full-year sales forecast for farm equipment in the U.S. and Canada. Deere now expects sales in the region, which together form its biggest market, to fall 5 percent, compared with its previous forecast of a decline of 5-10 percent.

Net income attributable to Deere rose to $802.4 million, or $2.49 cents per share, in the second quarter ended April 30 from $495.4 million, or $1.56 cents per share, a year earlier.

Excluding the gain of 55 cents on sale of partial interest in affiliate SiteOne Landscape Supply Inc, which provides irrigation supplies, Deere earned $1.94 per share.

Total sales and revenue rose 5.2 percent to $8.29 billion.

Analysts on average were expecting earnings of $1.68 cents per share, according to Thomson Reuters I/B/E/S. (Reporting by Ankit Ajmera in Bengaluru; Ediitng by Arun koyyur)