The term cotton is reflective of an absorbant material. Much like the term cottonmouth (dry mouth / the mouth which is dry), pussycotton refers to quite literally dry pussy. Which in turn is reflective of pleasure, or in this case a lack there of.
Nickname given to bales of marijuana thrown overboard or out of airplanes. Origin is reportedly from members of the US Coast Guard in the area of Southern Florida.
"Base we've got some square groupers floating outside of Miami harbor."