Located in the city's industrial hub of Taminda, the warehouse took its first set of clippings this week.

Australian Wool Handlers (AWH) acting CEO John Porter said Newcastle had historically been a wool stronghold, given it had wool sale centre nearby.

However, with that centre closing down about five years ago, the metro site had become a "less attractive place to store wool", particularly given the high city rental prices.

"It takes us closer to the heart of where the wool is grown," Mr Porter said.

"Tamworth is regarded by many as the heartland of the New England region.

"It made sense to relocated there, we feel that our wool brokers will be better served and it will lower cost for farmers.

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"Freight costs are a huge consideration right now for rural communities, particularly given the current drought conditions."

Mr Porter hopes 30,000 bails will be processed in Tamworth every year.

"We're really excited about our rural presences there, and we plan to be there for the long term," Mr Porter said.

Branch manager of Tamworth Elders, Jon Goudge, said the local wool industry had been pushing for the relocation for a number of years.

"What this means for our customers is a fair bit less in freight costs," Mr Goudge said.

"Some farmers might even bring it in themselves if they own trucks, now that they don't have to make the run down to Newcastle.

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"We've had a very positive response from our clients. The farmers can see the cost benefit in it, and as an industry it's something we've wanted to do for some time."

The wool will be tested and graded at the warehouse before being sent off to Sydney for auction, after which it will be shipped overseas.

"China is buying a lot, and traditionally the Italians like the super fine wool, which New England is renown for," Mr Goudge said.

"About 80 per cent of the wool is going to China, so they are still the dominate force."