The word filiae can be either genitive or dative; the two cases look alike in the singular of the first declension. If you read it as a genitive, then filiae is indeed "of the daughter" and this translation is correct:
Agricola filiae aquam dat.
The farmer of the daughter gives water.
If you read it as a dative, then filiae means "to the girl", leading to a different translation:
Agricola filiae aquam dat.
The farmer gives water to the daughter.
They are both equally correct readings of the Latin sentence. Only context determines which is correct. The second one makes more sense here; "farmer of the daughter" sounds unusual.
In your book the intended translation is the second one I give. But it does not specify the relation of the farmer and the daughter at all. You can add a "his", but Latin behaves very differently to English here. The word suus is an adjective modifying the daughter, not a genitive of the farmer. It has to have the same number, gender and case than the daughter.
Thus the most natural translation would be:
The farmer gives his daughter water.
Agricola filiae suae aquam dat.