My son and I both had a similar experience at our local county fair a number of years ago. His art work (which had been considered of high enough quality to be put on display at the art institute) did not even get an honorable mention. And a cross-stitch piece I had designed as well as stitched was put in with all the miscellaneous stitchery and also got only a participant ribbon. Needless to say we decided to not enter anything after that.
You mentioned that what you entered were art quilts. It may be that the judges didn't quite know how to 'take' them. That seemed to be the problem with my son's art work...it wasn't a vase of flowers or an old barn with a windmill.