"I wrote that song with a couple of friends, Shane McAnally and Josh Osborne," she says. "We were down in Texas, in the middle of nowhere on this ranch, just writing.
"It kind of started as a joke about something funny Shane's mum had said about her neighbours down the street.
"She was like, 'Well, they're definitely sellin' something down there. I don't know if it's Mary K or Mary Jane."'
Musgraves knew straight away that they'd stumbled across something and after playing around with words for a bit, Merry Go 'Round emerged.
"I knew it was really special. It was definitely the most favourite song I'd ever written," she says.
And the audiences agreed. "No matter where I played it, people were like, 'This is my life', 'This explains my experience'. I knew it had to be my first single."
Musgraves is on the road at the moment with Lady Antebellum and will soon join Willie Nelson and Alison Krauss on tour in the United States before spending the Northern Hemisphere summer supporting Katy Perry.
She laughs at the dichotomy but says it sums her up perfectly. It's also a glimpse into how dramatically life has changed for her in the past 12 months.
"Everything I am doing has completely surpassed my wildest dreams. I am doing things that I didn't know I would want to put on a bucket list because I didn't know that they were even possible. It's just crazy.
"I know these things don't last forever. I would hope my songwriting would allow me to be around for a long time, but even if it doesn't I'm already just so blown away by the things that I've done."
Kacey Musgraves' album Same Trailer Different Park is out now.