Ships disposing of second-rate cereal (4)
I believe the answer is:
oats
'cereal' is the definition.
(type of cereal)
'ships disposing of second-rate' is the wordplay.
'ships' becomes 'boats'.
'disposing of' suggests deleting specific letters.
'second rate' becomes 'b'.
'boats' with 'b' taken out is 'OATS'.
(Other definitions for oats that I've seen before include "Food for horses and Scots (said Dr Johnson)" , "Cereal plants" , "Grains or porridge" , "A cereal crop" , "Wild ones are sown in youthful excess" .)