Water stress is arguably the most limiting factor affecting cereal productivity in the world and its effects are likely to increase due to climate change. It is therefore imperative to have a wide-ranging understanding of water stress effects on crop physiological processes so as to better manage, improve and adapt crops to future climates. A field study was carried out to investigate the influence of four moisture levels on the following: (1) flag leaf CO2 assimilation and flag leaf carbon content; (2) the utility of flag leaf spectral reflectance to monitor leaf water status and as an indicator of biomass and grain yield; and (3) biomass and grain yield performance of four spring triticale genotypes in a dry winter environment (steppe, arid climate). The experiment was carried out in a factorial arrangement of four moisture levels and four spring type triticale genotypes). Soil moisture level significantly influenced biomass accumulation, grain yield, CO2 assimilation, flag leaf carbon content and spectral reflectance. Grain yield levels ranged from 0.8 to 3.5 t ha−1 in 2013 and 1.8 to 4.9 t ha−1 in 2014. CO2 assimilation was significantly higher under well-watered (WW) conditions (9.92 µmol m−2 s−1 in 2013; 11.64 µmol m−2 s−1 in 2014) and decreased gradually with moisture level to 1.82 and 4.74 µmol m−2 s−1 under severe stress (SS) in 2013 and 2014, respectively. Flag leaf carbon content was significantly higher under water limited conditions compared to WW. Normalised Difference Vegetation Index (NDVI), Normalised Difference Water Index (NDWI) and Water Index (WI) were significant and positively correlated to biomass and grain yield. WI was particularly strongly correlated to biomass (0.72***) and grain yield (0.55***). However, no clear varietal effects were detected. This study revealed that carbon tends to accumulate in flag leaves under water stress and that flag leaf carbon content is influenced more by the export capacity of the flag leaves than on CO2 assimilation rate. WI was found to be superior index in monitoring water stress in triticale compared to NDVI and NDWI. Above all, spring triticale proved to be adaptable to steppe (dry) climate of Limpopo and that livestock farmers in the province can successfully grow triticale for silage under MS conditions.