Poultry and small animal 4-H leader here.
These are kids that are showing and very few of them can afford really nice show quality animals. In fact, most of the kids in my club show backyard animals and I even had a class added to the show so that mixed breed birds can be shown. They aren't usually eligible for winning BOS, but the kids are happy they have a place to enter them.
For me, 4-H has always been about learning how to care for an animal, the basics of showing, and about your animal in particular. Got a mixed breed bird? Great. Research what breeds your bird is made up of and tell the judge that. 4-H is not about spending the most money on a show quality animal from top breeders. It is about caring for what you have, and putting time into the things you care about.
I used to have the same beef about horse shows back when I was showing. I had a backyard horse that I mostly trained myself. Some of the other kids who constantly won at shows would spend tons of money having OTHER people train their horses and they would not do a thing except get on and ride the day of the show. Yet 4-Hers like myself, who were actually learning and doing the training ourselves, would often place last. It was extremely discouraging, and I've done all I can as a leader to prevent that from happening at our poultry show.
I don't, however, tolerate birds that are sickly or not in good shape. All of our members must clean cages regularly. I don't mind if they have a bird that doesn't match the standard and I smile when I see that member with a hatchery quality or backyard bird spending the time to clean it up before judging. They are still learning even if their bird is not the best in it's category. We also have a judge that is great at understanding this.