I'm going to assume you have already put dung into the fertilizer storage. What you do now is you take a shovel and dig up a weed, then place the block of fertilizer onto the weeded soil. This will make the square turn a dark shade of brown. After that you can use a hoe to till the soil, then plant a cereal seed on it and you make a higher quality patch of cereal.

Same goes for when you use your scythe on the lower quality patches of cereal crop. After you cut it, fertilize it and do the same thing.