The+potatoes+had+become+soft+and+discoloured,+and+only+a+few+were+edible.

This sentence is a metaphor describing the animals who were murdered compared to the remaining living animals. The ones who were killed by the guard dogs after confessing to Napoleon are the "soft and discolored" potatoes because they have grown to be bad, through the eyes of Napoleon, and did things that were against/disobeyed him. The "edible potatoes" are the living animals who have grown to be nice and good and have not gone against Napoleon, not yet anyway.

-Erika Flores