1) More Efficient Storage
I hope I'm not the only one who seems to run out of space to hold dozens of stacks of wheat. Just like how minerals can be condensed into solid blocks to save space, so should wheat.
The crafting recipe for wheat would be 9 wheat in a square (figure 1)
Figure 1: crafting of a hay bale

2) Aesthetics
Haybales have a unique look that represents a missing piece in minecraft's block repertoire. With haybales, things like straw-hatched roofs, hay-floorings for barns, and pre-harvested fields of wheat littered with bundled hay. In any case, hay bales are much needed blocks for building.
3) Automated breeding
Am I the only one who finds it tedious to have to feed your animals one by one to get them to make babies? Well, hay bales would effectively automate the entire process (excluding actually placing them).
Each haybale would function as a sort of beacon. When a hayblock is placed, it automatically generates an invisible sphere with a radius of 9. (figure 2)
Figure 2: Radius of a hayblock's beacon

When a pig, cow, sheep, chicken, or mooshroom enters this zone, it becomes "bound" to the specific hayblock. Each hayblock can have up to 5 animals "bound" to it at any one time.
When an animal is bound to a hayblock, it will periodically (every 1-3 ingame days) enter love mode as if it was given wheat. It will stay in love mode indefinitely, or until it is killed or until it breeds. Thus, the cycle repeats, as its offspring become bound to the same hayblock, or adjacent hayblocks.
In esscence, this means that animals stay close to hayblocks and will automatically breed when near them.
Once 9 love-modes have been activated from a single haybale, the block disappears. This means that haybales are only really useful if you have a lot of wheat, and thus have a lot of haybales piled in a pen for animals to keep on breeding. If Notch wants to, he could actually make hayblock decay like cake (only vertical), where the block decreases in size when it is used.
I hope you like the suggestion, guys. Any support, comments, ideas, or criticism is appreciated.


















