Ruling on Purchasing Grain or Flour with Zakat for the Poor]

Answer—and Allah is the Granter of success: What appears to me is that there is no impediment to that with respect to the zakat of trade goods, since the jurists of the madhhab have said it is permissible to pay the monetary value in the zakat of trade commodities; and since they have also said that dedicating (waqf) or vowing the yield of land as an offset against wrongs (maẓālim) and the rights of Allah the Exalted is valid.
It is known that wrongs and the rights of Allah the Exalted vary in their kinds: a wrong may be in cash, in clothing, in animals, etc.; likewise, the rights of Allah may be the zakat of trade goods, or of livestock, or of grain, and so forth. They said that if a person dedicates the yield of land with the intention of clearing himself of some such obligation, it is valid.
Thus the jurists of the madhhab have treated the grain yielded by endowed or vowed land as a valid “value” (qīmah) offsetting what is owed in the liability (dhimmah), whether that liability was cash or something else.
If it be said: The jurists of the madhhab only permitted and validated that on the basis that such rights must be delivered in their very items to their recipients; if those items are destroyed before delivery, delivering them in their very form becomes impossible, and thus the obligation becomes delivering the monetary value. In what you have mentioned, however, there has been no destruction and no impossibility.
We say: What we seek from their words is that they recognized grain as a valid “value”; our adducing their statement is only to establish that point.
Source : Min Thimār al-ʿIlm wa al-Ḥikmah vol.1