This kind of problem is not given within a "normal" curriculum for every 3rd grader. But I've seen this kind of level of problem in advanced programs and as an optional/advanced/fun sections of some good textbooks.
If "solve without Algebra" was a requirement, I would go for the following explanation for a 3rd grader. Actually, as you will see, I will use (hidden) Algebra, without formally introducing variables.
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A. If length and width were EQUAL to one another, then they would be equal to
80 / 4 = 20, then
the Area would be 20 * 20 = 400 (case A).
B. What if length and width were NOT equal?
The total of length + width is half of the perimeter, or 40.
If the longer side is more than 20 by some value, then the shorter side must be less than 20 by the same value. We will call this same value "difference" (compared to 20).
So length will be (20 + difference), and
width will be (20 - difference), and
the area will be (20 + difference) * (20 - difference),
then (ether with the full calculation or, if the 3rd grader was ready to use the "difference of squares" formula) it comes to
Area = 20 * 20 - difference * difference (case B),
which means that, if there was any 'difference' between length and width, we would be
subtracting the value of (difference * difference) from 400.
In case A, when all sides of the rectangle garden were equal, the area of the rectangle garden was 400.
So 400 if the greatest possible area of the rectangle garden. Note: when the rectangle is a square!
Answer: The greatest area of garden that the farmer can fence is 400 sq. ft.