Farmland can trash Watchtower, but not the other way around. This is because Farmland's ability is "on buy" and Watchtower's is "on gain."
1. You buy Farmland.
2. BEFORE you actually gain the Farmland, you must choose a card in your hand to trash.
3. You choose Watchtower, trashing it and gaining something else.
4. You gain the Farmland. You do not have Watchtower in hand to reveal.
Now, if Farmland said "when you gain" instead of "when you buy" then I think they could actually trash each other without a problem:
1. You buy Farmland.
2. You gain Farmland.
3. Two events trigger at the same time: Watchtower and Farmland.
4. You choose to reveal Watchtower, trashing the Farmland.
5. Farmland's event is still there, even though Farmland is gone. So you trash Watchtower, gaining another card.
You have to reveal Watchtower first though. If you choose Farmland first, then you don't have Watchtower in hand to reveal it.